Wow! I was right on the money. Management did it again. I mentioned the possibility that they could present an offering that protected shareholders and that did not happen, of course!
They are offering the shares to current shareholders at a discount of 20% to current PPS at $3.19 and that offer comes in at $2.55. As I also mentioned the lower share price will lead to more shares outstanding. A while back, at a higher share price, I figured that a shareholder may need to only increase his holdings by about 20%. With the PPS at such a low price, a shareholder must buy about 31% more shares at a discount to protect his investment (by averaging down.) This means that with 16.1mm shares outstanding, almost 5mm shares will be issued from the rights offering resulting in 21mm shares outstanding.
With a URRE stock price of $3, that would equate to a market cap of around 63mm after the completion of the offering which would include the 13mm in funds raised. So, the real question comes down to how URRE will be valued after the close of the offering. At $4, URRE would be valued at around 84mm. I suspect, the PPS will settle somewhere between $3-4, but more likely on the lower end based on the economic environment and URRE's current position.
Remember, it is VERY important to buy your allotment of shares as a shareholder to average down. If you do not, you are giving those discounted shares to someone else. Thus, you are penalized by not taking your allotment as this rights offering is a dilution to shareholders. The reason that the rights offering is designed to protect shareholders is that you are able to average down to accomodate the loss in overall stock price due to the dilution.
It will be interesting to see how low the PPS goes over next few weeks due to this rights offering. I anticipate we could see PPS drop to $2.75 range before levelling off and heading back up once offering is completed. More pain for shareholders.
I took, a small position, at the close Friday. Here are some of my thoughts.
With, your math, let's say $3 per share,, with 21 million shares,it's a 63 million market cap.
The market will add the 13 million they raised to their market cap., then we have 76.
My hope is, the rights is filled quickly, and not extended or fails., wouldn't be surprise, if the price
breaks through the 2.55, should move up, if the rights is a success. Less than 3 million shares have
traded since the 28th, If I had own shares prior to the 28th, I would of sold one third, for a couple reasons,a tax loss, with,replacing those shares at 2.55,or just selling, cause rights always hurts the share price , However, January, is early to book a tax loss.
Free, a couple of things. Market cap right now is based on current shares which is only 16.1mm. Adding the new shares, you have 21mm and market cap of 63mm including the 13mm raised. So, $3 is likely a correct valuation based on that. However, URRE has been unfairly undervalued based on the pain from the reverse split and this expected dilution. So, you and I must determine where URRE should be valued after the offering closes. Right now, URRE will continue to be pressured by the economic conditions affecting the U sector. On the positive side, there is not much additional downside risk for URRE as they have no debt and will be sitting on quite a bit of cash at least for short-term.
URRE is trying to get this offering behind them quickly by making the length so short. Look for it to be extended with it likely taking to the end of the month. URRE will sell all the shares necessary and will raise all the capital expected. PPS will not move down to the discounted price, but could get close. Again, I stick with my $2.75 area as a potential low. As the offering nears closing, look for PPS to rebound. To where is the big question. Based on how far shorts have taken this thing down, I would not be surprised to see a bounce to $3.50 area. Still think PPS will settle between $3-4 until positive news moves URRE back up. For those willing to wait it out, I sense that $5 is a feasible short to mid-term target.
This is bad news, however, for longer-term holders as a PPS of even $5 is only .50 per share (pre RS) which is a well below what most paid for this stock. Plus $5 is a market valuation of over 100mm which is double where it is now. That would be a pretty significant move.
Bump to top. It appears swissmotoidiot wants to create much noise here so that those with real concerns are unable to find any reasonable information. Any shareholders unsure of what to do should call IR to find out how to get their new shares and call their broker about first selling off some shares to replace with the discounted shares. There is a wash rule regarding ability to take loss on those shares you sold if you buy them back so quickly. This means that the new shares would have to be sold by the end of the year to take the loss on the original shares. Again, talk to your broker about this. Ultimately, you will be able to recognize the loss once you sell the new shares. Hopefully, though, you will be making some profits on the new shares to help overcome the loss on the original shares. Again, please discuss this with your broker if you have any questions.
I suggest everyone put swissidiot on ignore.
dont forget this is still a paper company with a few filing cabinets and a management drawing salaries and expenses at a rate of $10M per year. True there is some good properites but it would take enormous capital to mine it and bring it onto the market.
Takeover by a larger such company is the only way out Savior.
UEC I have in mind. Anyone? Any feedback and ideas here?
We hit $2.81 at the bottom. Have experienced some buying since that point. Now we are back above $3.00. I have been throwing some numbers around based on average cost basis of ownership prior to date of record and calculated in the dilution based on the $2.55 share price. My low point of $2.75 is pretty much on target, although we may not get lower than that $2.81 earlier today. Look over next week or two to see if we retest that low. Ultimately, the PPS will settle above $3 pending further news from company or other economic catalyst helping stock. Best guess is a PPS back above $3.20 to maybe $3.50.
Still need to flush out sellers. Like I already mentioned in another post, there will be shareholders selling off 30% of their holdings (at PPS higher than offering) and replacing them with shares from the rights offering at $2.55. That is a no-brainer if you are not looking to add to your position. Selling here at $3 and buying back at $2.55 reduces cost basis by .45 per share. That is $450 savings for each 1000 shares you sell and replace at the lower cost basis. If you are holding 20k shares and can do this with 6k shares, you are effectively saving yourself around $2700 just by lowering your basis. Like I said, NO BRAINER!
it seems like with this offering and dilution , new book value should be around 2.90-3.00 $
i dont think pps should/will drop a lot below that if at all
in the mid-long term i still think were looking at 8-10 $ minimum
in my opinion