Monday, May 6, 2013

Received my CXB proxy form

Should I really have been surprised when I read that it has been recommended that shareholders vote yes on a proposed share consolidation.

I get a kick every time I read a recommendation like this, as if it will somehow bennefit the share holders.

Now, granted, CXB has ~190 million shares. In case no one has been through this before let me explain to you what typically happens.

Typically, when a company announces a proposed rollback, sp goes down. Not horrendously, but down none the less. Why? Well, because people who believe that there is a good chance the reverse split will occur realize, or have learned, that the stock price, almost always (especially in the junior exploraco industry), ends up going back down to the same, or near the same price, as it was before the roll back. So, out of fear of just winding up with less shares at the same price, they sell their shares, even if its at a large loss, and buy back the same position after the post-rollback havoc has been wreaked upon the share price (or they just walk away asking why they didn't liquidate sooner).

In a worst case scenario, the rollback actually gets shareholder approval and so ensures what it described above.

Long story short, a reverse rollback essentially leaves you with less amount of the same priced shares. Now, your shares may have more value in the sense that there is less of them around and any large, panic buying inducing, news will likely see the stock go up to higher levels than it would have otherwise...but, of course, you have less shares.

Rollbacks are notorius in this industry because many companies don't seem to do anything other than sell stock, and when their shares drop so low that there is little interest in buying them (because they haven't done anything to create interest) management decides that a higher share price will increase share buying. Now, that doesn't really help the investor who is down on his investment, but certainly does help management. This was a game played for years on the VSX, and has continued on the TSX-V.

All this being said, I don't want to make it sound like Calibre Mining is one of those companies. I really do not believe they are. They have a nice story, that just seems to be getting cheaper like all other junior stories right now. As per a recent news release, B2Gold is to spend 6 million in exploration work on their Primavera property for an additional 19% stake in the property (which, after earn in would be a total of 70%). 6 million in exploration in this market is something to champion. I think CXB themselves are running low on cash (a little over 1 mill in the bank as per last financials) and may be sweating a bit when the idea of management fees, exploration costs for other properties, and listing fees/working capital comes up ( that order of course).

With good news on the horizon, minimal cash, other promising looking projects, and 190 million shares outstanding I could almost think about considering to vote yes....but I won't. Nothing like asking the shareholders to take another one for the team. How about increasing shareholder value before asking us to agree to decrease it.

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