Hi RM, I just plucked that figure out of thin air. I have seen...

Hi RM, I just plucked that figure out of thin air. I have seen this pitch before where a broker involved in a placement tells it's favoured clients (read "sophisticated investors") that its analysts value a share at more than double the current price they are being offered for a large parcel (say several million shares), ahead of a good announcement like approval by the FDA. At the same time they give a relatively low ball figure to the company to make the price attractive.

Once the good announcement comes out the shares run into unexpected heavy selling with lots of cross trades, and when the annual report comes out most of those sophisticated investors are nowhere to be seen in the top 20. The company has its cash at the cost of more dilution than necessary, and the broker walks with a bucket load of commission from it all and probably a bit of a bonus on the side.