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SANDSTORM GOLD LTD. Message Board

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  • zentrarian zentrarian May 5, 2012 2:14 AM Flag

    For those who are high fiving about the consolidation think about this....

    With all due respect, this doesn't make a lot of sense to me. As stated by management, future acquisitions will be funded primarily (quite likely completely) from cash flow and Sandstorm's revolving line of credit, which the company will be in a position to pay off from income alone within a year or so in the unlikely event of a major downturn. The consolidation creates no increased need whatsoever to dilute share holdings in the future, since cash flow, market cap and all other relevant factors are UNCHANGED. On the contrary, since a company's ability to raise capital is largely predicated on the perceived strength of its stock in the market, by your own logic, if the stock price is higher due to the consolidation it should make raising capital without any further dilution EASIER rather than more difficult. (This is in fact exactly the dilemma facing Sandstorm's prospective new streaming partners: they need to raise capital at the same time that their stock prices and market capitalization are weakest.)

    It's unfair to say that the consolidation indicates that management thinks that retail investors "aren't worth squat." Early investors like ourselves will benefit more than anyone from institutional investors' ability to participate in Sandstorm's success even sooner than we anticipated. Anyone who has skin in the game is entitled to their opinion, but if the consolidation is such a poor decision, I would like to hear a reasonable explanation of how a person of Mr. Watson's experience and knowledge of his business could be guilty of such a grievous error of judgement. If you believe that it's simply to free the company to issue massive amounts of new shares, you'd really better sell all your holdings (to me) immediately.

    z.

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    • Z, I agree with your position completely.

      One additional point, the term "dilution" is often used when additional shares are sold by the company to raise cash. I understand that in many (most?) cases when companies raise money that way, it does in fact dilute exiting shareholders' value. However, hypothetically, if the number of shares are doubled, but the cash is used to double the value of the company, I don't see how that is dilution. True, as a percentage of the company one owns would decrease, but in my book, half the percentage of twice the company is equivalent. Besides, I've never owned enough shares to even contemplate it as a percentage. For me, it has always been the number of shares, and dollars per share, and as long as the product of the two numbers are the same, or increases, I'm happy. Trin

    • Z,

      I love and respect you tremendously, along with everyone else here.

      And healthy discussions are important, because we can't always be cheerleaders all the time. There are positives and negatives to this company. That said, no one has even made a valid point to why we need a s/p at $9, based on yesterday's close.

      I'm guilty of this: when someone is not exactly happy at the moment, raises their issues and someone (me included) goes on to say, if you're not happy sell your shares to me. Now, I understand where those folks were coming from and I'll never say that again to anyone. If I didn't have a stake in this company, then I wouldn't have a leg to stand on. But, since I do own part of this company, am I not allowed to say what's on my mind?

      Simson, no one knew that the "plan" was for a share roll back. Management has never discussed this before.

      Later on down the road, if y'all don't think that equity will be issued to help finance new deals, better think again. That's gotta be in the "plan".

      Once I'm able to, I'll convert my warrants into commons, then the money making begins.

      I truly do wish each and everyone of you luck, but know after the uplist and when the s/p is dropping, I'll be on the other side of the trade. I'll never bash, because that's childish. But, I will go with the trend weather it's up or down.

      • 2 Replies to metalschick
      • The sooner an up-listing happens for a company the better unless of course if the share price of the stock occasionally drifts back under the amount needed to continue being listed because of market conditions. The last thing we would want is to be listed when we have a few q's between $2-3 and the bottom falls out of the gold market and we drift back down to $1.50-1.80 and we lose our up-listing.

        Personally I'm more concerned with staying above the $5.00 mark which even with a downturn we should be safe. Contrary to past posts almost every institutional firm I've been involved with will not and can not invest in companies whose share price is under the $5.00 mark.

        I'm as passionate as most on this board about Sandstorm and they are my largest holding. This consolidation has only strengthened my outlook and as such I will be adding to my position with future announcements of new streams.

        It will also be nice to have the same opportunities using all of the trading tools the market has available when needed ie: (options) are a better choice than inverse etf's during weak pm markets.

        As always, I wish all of you the best of luck with your choices and investments. This is a great company and a great board. Good to be along for the ride.JB

      • Thanks for that, metalschick, the respect is mutual. I've never intended to say that I consider any opinions less than valid or welcome, however much I might disagee, and I especially would like to see more reasonable negative views posted here. My issue with the arguments against consolidation is that for the most part they seem to be based on misperception, rather than facts. They seem to fall into one of the following categories:

        1. A reverse split is perceived negatively by the market.
        This may be true in general but only because it is usually done to prevent a delisting. Sandstorm is in the opposite situation, and even if some retail investors ignore that fact, you can be sure it is not lost on the institutional investors that are far more capable of sustainably moving a stock's price upward. Therefore, any short term psychological reaction to the consolidation should be of concern only to traders or those looking for an opportunity to buy in a sharp pullback. (A pullback that IMO would have already happened if it was going to.)

        2. A reverse split is unnecessary.
        This is a bit more defendable, since the stock has been doing well lately and it is probably only a matter of time until SNDXF could uplist "organically". But surely management is aware of this as well, and IMO their decision to expedite the process can only mean that institutional investors have strongly encouraged them to do so. It is quite possible also that NW foresees a re-ignition of the bull market for gold in the near future, and doesn't want the Big Money to have to sit on the sidelines waiting for the sp to catch up to the POG, as has so far unfortunately been the case for almost all PM equities.

        3. "Resetting" the share float downward is going to encourage further dilution at some point in the future.
        In the absence of any evidence of profligate disregard for shareholder interests in the past, we have to take management's guidance on this at face value. Maintaining shareholder value has always been a major concern for the company, and their personal interests in doing so obviously align with our own. They have assured us that they will finance new deals primarily (perhaps exclusively) through cash flow and their revolving LofC from this point forward. If there is an opportunity that is too good to pass up, additional cash can also be raised by calling in warrants early, raising the revolver, or other means. I'm not saying that dilution is not possible, just that IMO it is clearly viewed as a last resort and will only be used if and when the opportunity for leverage makes it an overwhelmingly compelling option.

        Although I would certainly not encourage blind aceptance of everything management proposes to do, this is one instance where I think it would be wise to defer to their huge advantage in experience, knowledge and insider information relative to most if not all of us on the board. If I was inclined to second guess them on this particular issue, I really would have to question my reasons for investing in Sandstorm in the first place.

        z.