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Strategies & Market Trends : The DD Maven
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To: creede who wrote (238)3/4/2006 3:56:17 PM
From: rrufff  Read Replies (1) of 736
 
I'm not crazy about generalizations. I prefer to look at each company's situation on a case by case basis.

I don't think this area of the market falls into what the Motley Fool article is discussing because the inherent value is so speculative, one could justify almost anything.

For me, it comes down to how "transparent" the company is in issuing shares and the use of the shares. Sometimes, it is better to use shares than to deplete the cash. Are the shares being used for drilling expenses or are they being used to promote?

I'm not one to say that management should have to work for nothing. OTOH, I'd prefer to be with management that realizes that a little sacrifice by them, such that they don't just dump to pay their salaries, sends out a message to the investment community that they are in for the long run and are willing to sacrifice. The payoff to them I believe would be greater if there is a huge increase in the share price and the perceived value of the business per share.

Do the math and then ask management if they are willing to sacrifice a few thousand dollars when a stock is selling in the penny area vs. the potential increase in their net worth by perhaps millions if operational success brings the share price up to the microcap or small cap range.

So, it's case by case. Ideally, you find management that is really entrepeneurial. They have their own personal money invested. They don't need to dump shares for a few thousand bucks to pay their immediate bills. They realize that keeping the float and o/s "tight," operational success will reward them and the shareholders. "Win-win."
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