Private placement is a risky deal for the brokers, as the issue does not close for a few weeks, and during this period the subscribers can back out leaving brokers holding the bag and that would cause the SP to be low for many months (check the ECU 0.70 PP last year). So if it is a bought deal, the price has to be low enough that brokers have 100% confidence it will sell out, and SP will not drop below for 3 weeks or so below the PP price.
If the company is very confident the issue can be sold out, they can go for marketed deal and halt the trading for 1-2 days until marketing is done. The risk for the company is if SP drop to 0.70, then they will be forced to make PP at 0.65. If it get sold out at 0.75 or higher, then SSL will be laughing.
It all depends on who wants to be in the risk.
With a bought deal, the risk is all with the brokers. In marketed deal, risk is with SSL.
Check PDP pp last year, they refused the market price and wanted to market the deal. Brokers and traders pounded the SP down 40% in the next month, and they were forced to have a PP at much lower price.
SSL needs to do many PP in the future if they want to have cash available to invest in projects, maybe at least once or twice per year. Each PP is a temporary setback of SP, but gives them cash to negotiate better projects.
I was told many subscribers got fill for only 10% of their asks. |
