KPNG, dilution is extremely important and dangerous to ATV SP. Literally a factor of 4 on the SP.
Easiest way to demonstrate the difference is as follows;
Issues shares. $140mil rasied at say 6c per share = 140mil/6c=2.3billion new shares.
As such; total shares on issue becomes 2.3bil + 590mil existing shares = 2.9 billion shares
Say the total NPV or what ever you want to use to assign a market capitalisation is $294million.
therfor value per share becomes 294mil/2.9bil=10.1c per share when all new shares are issued.
If we use 100% debt however for 294mil value of project, less interest of 54mil =240mil project. 240mil/590milshares=41c SP.
Accordingly protecting shares at these levels is vital to preserve value once project kicks off. Debt is good!
I can understand your analogy of paying it back, but you are spreading the value added over and the capex, or the "cream"(payback of principle capex is obivously removed from NPV of value project) amoungst 2.3billion new shares, 4 times the number of shares on issue now.
Your alternate thought process of protecting your shareholding through a rights issue etc if you participate, SH essentially cooough up more money for the same income coming back down the track, hence a much lower return on investment.
ATV Price at posting:
3.3¢ Sentiment: LT Buy Disclosure: Held
