Just A Thought....., page-16

mr-delta

Totally agree there is room for both disciplines which was the very point that was trying to make.

As to my analogy – the point which I was trying to illustrate is that a Listed Company’s market cap is a pure mathematical calculation whereby the price at which the last share changed hands is multiplied by the amount of issued shares – therefore if a single share is offloaded at a discount – this alters the market cap.

This as we know is the very reason why a lot of the small cap companies have struggled to raise finance in the recent past with some tending to ‘Buy into rumour and selling on news’ - and I’m not criticising that approach because there is money to be made. However - this in turn often has the knock on effect whereby a company who has released great news which has bumped up their net asset worth finds themselves in an unfortunate position whereby their market cap actually reduces to a figure below pre-announcement levels.

Such a situation is not problematic until the aforementioned company needs to raise additional funding with the commercial lenders/banks tending to look at the market cap as well as overall financial stability when assessing whether monies can be forwarded.

Those that sit in their ‘ivory towers’ making lending decisions based so often on computer generated rather than human interaction - often find it difficult to look beyond ‘cause and effect’ and the reasons as to why a market cap has fallen in the short term - thus so many smaller cap companies resorting to the issuance of new shares at a discount to existing share price in order to raise the required capital.

So – I am not attempting to down-play the value of either investment approach as both have their place – but it’s easy to see how many small caps fall into funding ‘danger territory’ when they have made all the right moves and achieved above market expectation results only to find that they are being starved of capital availability.

Fortunately COI has never suffered from such a situation with investors old and new wanting to take a slice of the action – in the last capital raising a number of new sophisticated investors with deep pockets came on board – but this cannot be said for all Juniors.

My best bet being that the lure of moving from a Private company to being Listed is becoming less attractive for those companies that are focussed on the longer term rather than the founder investors purely looking to achieve a return on capital invested.

Just my take on the markets – but what do I know?

Good luck…