Steve, DAK has about 16,000,000 shares outstanding. It is stated in a former press release that a US investment bank is willing to advance DAK US$10,000,000 for a 25% interest in the company.
Interpretation One: This amounts to US$10,000,000 spread over 4,000,000 shares or US$2.50/sh assuming no new shares must be isssued.
Interpretation Two: If this agreement is interpreted to mean that new shares will be issued so that the bank ends up owning 25% of the company then the number they must receive is 5,333,000 shares increasing the outstanding shares to 21,333,333 shares. This then amounts to US$10,000,000 spread over 5-1/3 million shares or a little less than US$2/share. In Canadian dollars this second scenario implies about C$2.50/share, instead of US$2.50/share.
Now if a major investment bank is willing to make an agreement like this, then it must mean that they believe DAK really has something. Assuming the bank is out to make a profit and not just break even on their underwriting, then it is reasonable to expect DAK shares will trade higher than C$2.50.
Hence my reasoning three replies above, where I stated DAK shares are currently available at a deep discount. After getting today's closing figures where the shares are up 28% from Friday's close on volume of 131,000 shares, the discount is not quite what it had been when I made my initial statement.
Today's trading might signal a mark-up in DAK's stock is about to begin.
Don DeKold
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