Q: Hi 5i Team - Argonaut Gold has announced that it has just completed a Follow-on-Equity Offering of CAD $80 million. Is this a positive for the company or is the further dilution a reason to sell and move on to something else. There are already over a billion shares, and I am assuming this is before the recent offering. Do you think the market has already priced in this further dilution. Also what does 'Follow-on-Equity' mean.
Thanks.
Thanks.
5i Research Answer:
A follow on is just an additional offering, and can either be (i) new shares, or (ii) existing shares that shareholders, not the company, are selling. The former is dilutive and the latter is not. A company building out needs financing, and the deal is not that surprising, considering AR's high debt level. The deal has closed, and looks priced in. A positive, at least, is that the market price is now higher than the deal price. Small caps and golds are starting to perk up, which bodes well for AR. Its small size and debt though should be risk considerations.