Updated Rights Plan is Profoundly Bullish!
The changes to the Rights Plan were announced Thursday evening, October 19th. IMO, the news is profoundly bullish for Campbell.
In the original Rights Plan, 108 million rights would be issued. One right to each shareholder that held shares before any of the financing deals. In the new plan, Sprott’s 125 million shares, which they recently acquired, also become eligible for Rights. So the new Plan has 233 million rights being offered.
But no new dilution occurred. To exact, I think around 4 million additional shares are being issued, but it’s inconsequential. So the way that Sprott gets their Rights, is by offering fewer Rights to the original shareholders. You now need 10 Rights to subscribe to a unit, instead of 5 Rights.
But the big picture has only gotten better for us. Here’s why:
1) The reason this change was made was obviously because Sprott demanded it. The original deal has already started to trade (I think) for a few seconds on October 5th. The printer was most likely already working on the printing of the Prospectus. All these things were in place, and they stopped the deal, in order to change it.
That just has to mean only one thing. Sprott was able to read the market, and they have sensed (correctly) that the new Campbell Resources will have huge investor interest. They could have figured that out just by all the phone calls that they were getting. Brokers talk, and brokers ask questions.
And they probably have Analysts read this message board on a regular basis (that’s not unusual at all). And I’ll bet that there were already Bids forming, or inquiries on how to Bid for the Rights on October 5th. They knew the interest was strong.
And I think that Sprott determined that the market is aware, capable, and prepared to value CCH shares well above $1.00 in 2007. My target price is $2 - $5 a share.
The partners got together, and they decided to try to grab themselves another bundle of shares. Their new Rights will equate to an additional (approximately) 35 million shares and 17 million warrants.
So just doing a ballpark estimate, if you use a target price of $3, Sprott partners just picked up another $150 million profit. Not bad for trying, not bad for spending a few hours explaining to Mr. Fortier why this was such a good idea.
This is part is pure conjecture: They could have begged: “We’ll help support the market. We promise. We represent are strong hands”
This is fact: With this many shares in Sprott’s hands, a hostile takeover of Campbell is now impossible.
Think about this… The first press release, around April 24th, indicated that Sprott was buying 125 million units (each unit is one share and ½ a warrant)
Then, just a few weeks later, it was announced that Sprott was buying 125 million units.
Now, at the last minute, Sprott demands one more change, and it’s announced that Sprott is buying another 37 million units.
This is simply unheard of. Sprott is the Number One respected Investment firm in this sector, and they are swallowing up as many shares as they possibly can, even if it means they have stop a moving train (the October 5th commencement of trading).
And Sprott partners just picked up another $150 million.
What about us? Hey the common shares, are down at .08 right now. You want more shares? Buy them now. And you’ll get rights too (most non-Canadian shareholders will have their right sold for them)..
The shares are yours for the taking - but not for long. Seeing the highest volume in over a year today, some other people are already buying.
And God, I’ve never seen a MACD crossover (technical indicator) scream so powerfully.
I asked this rhetorical question over a month ago… What on earth would Sprott ever do with 125 million shares of a stock that trades so low, and has such a thin market depth? They could never sell 125 million shares without driving the price to $0.01.
The answer was obvious: Sprott sees a radically different price and market depth environment in 2007, and beyond. They see the price in the single dollar range and depth in the millions of shares a day.
That was my answer over a month ago.
Now the question is What on earth would Sprott ever do with 175 million shares of a stock that trades so low?
Sprott doesn’t seem worried. Their long term goal is to DISTRIBUTE most of those shares, and they see DOLLAR signs.
Now are you as smart as the partners at Sprott? |
