I will not bore you with additional elaboration on the problems in the gold market, other than to say that I’m not losing any sleep over it, I’m not selling, and I expect better days ahead.
I did have a heart attack this week, however, when AXY.TO – Alterra Power Corp. announced a $50 million financing, comprised of a $25 million private placement, and a $25 million bought deal, both at $6 per share.
On Tuesday Alterra traded at $6.55, and after the deal was announced Alterra traded briefly below $6 on Thursday, before closing the week at $6.07. Here’s the deal:
Alterra needs money to progress on one of their wind projects in Texas. They will probably partner with another party on the financing (probably with Warren Buffet, who they have worked with before), but this gets it started. The financing makes sense.
Unfortunately, when you offer shares at $6, the market assumes that your shares are worth $6, and hence the big downdraft in the price when the deal was announced. In hindsight, had I known that this deal was coming, I would have sold all of my shares and repurchased them at $6. I’m not an insider, so I had no advance knowledge, and even if I had I probably wouldn’t have sold, since my cost basis is less than $6 regardless.
This does set up a great opportunity to get long, or to increase your holdings. The private placement and bought deal are probably sold out (although demand was high and they upsized the deal to $75 million), but with the market price near the financing price, this is a good opportunity to pay what the insiders are paying.
My expectation is that once the deal is closed and there are no more $6 shares to be had, the price will drift back up to the $6.50 range, and we are off to the races.
So, it’s a buy for now.
As for gold, I’ll have more thoughts on that next week.
Thanks for reading, happy Canadian Thanksgiving, and see you next week.
Alterra Power Corp. Financing
by JDH on October 8, 2016
I will not bore you with additional elaboration on the problems in the gold market, other than to say that I’m not losing any sleep over it, I’m not selling, and I expect better days ahead.
I did have a heart attack this week, however, when AXY.TO – Alterra Power Corp. announced a $50 million financing, comprised of a $25 million private placement, and a $25 million bought deal, both at $6 per share.
On Tuesday Alterra traded at $6.55, and after the deal was announced Alterra traded briefly below $6 on Thursday, before closing the week at $6.07. Here’s the deal:
Alterra needs money to progress on one of their wind projects in Texas. They will probably partner with another party on the financing (probably with Warren Buffet, who they have worked with before), but this gets it started. The financing makes sense.
Unfortunately, when you offer shares at $6, the market assumes that your shares are worth $6, and hence the big downdraft in the price when the deal was announced. In hindsight, had I known that this deal was coming, I would have sold all of my shares and repurchased them at $6. I’m not an insider, so I had no advance knowledge, and even if I had I probably wouldn’t have sold, since my cost basis is less than $6 regardless.
This does set up a great opportunity to get long, or to increase your holdings. The private placement and bought deal are probably sold out (although demand was high and they upsized the deal to $75 million), but with the market price near the financing price, this is a good opportunity to pay what the insiders are paying.
My expectation is that once the deal is closed and there are no more $6 shares to be had, the price will drift back up to the $6.50 range, and we are off to the races.
So, it’s a buy for now.
As for gold, I’ll have more thoughts on that next week.
Thanks for reading, happy Canadian Thanksgiving, and see you next week.