Learning to Day Trade, page-24

Here it is clearly as a bad sign:

company has 1m shares trading @ $2 each
It has no money and little assets
It needs to raise through a rights issue to find $1.5m to cover expenses for the next 6 months at 1:1

So they raise 1m further shares at $1.50 each (discount for current holders)

So now you have 2m shares, 1m valued at $2 each and 1m valued at $1.50 each.

The volume of shares has increased 100%

So you now have 2m shares valued roughly at $1.75 each ..........$2+$1.50/2 if maths were that simple

Looks like you are about even doesn't it, however because the raise was at $1.50, this spooks the market, so all the shares fall to $1.60, even with the extra $1.5m cash in the bank.

cash raised in the bank is merely covering management wages and listing costs, there is no upside to the recent raise above, no income will be generated, no income producing asset bought, from the new cash issuance.

Say you had 100 shares worth $200
You bought another 100 at $1.50 (rights issue) at $150

SP is now $1.60, so 200 shares x $1.60 = $320

You my friend are down $30 or circa 11% with potentially no upside.


With mining stocks esp, the next raise is to just keep that drill going, yes there can be great upside if a resource is found, but in 95% of cases, they find FA.

Raising more shares is not always a good thing, can be highly dilutive to current holders, the reason behind the need for the cash raising is of far more importance.