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I Hate Reverse Stock SplitsDudley Baker I started to title this piece, 'These Guys Are Killing Us.' Where I am coming from is that over the last eight months or so many of the junior mining companies have required additional financing to meet current requirements. In better times and at substantially higher prices, the raising of additional monies and the issuance of more shares and warrants could have been accepted, at least reluctantly, by shareholders. Unfortunately, we all know what has happened to the juniors' share prices over the last eight months. So many of these companies are literally selling for pennies but many are still in need of capital, meaning they need to sell more shares and warrants usually via private placements at these depressed prices or worse. Many of the placements are being made at a 20% discount to the current share prices, thus making a bad situation even worse. A company's share structure consequently becomes larger and larger and thus the probability grows of a rollback in the shares. This really is a reverse stock split, meaning current shareholders receive fewer shares than they currently own. For example, if XYZ gold company has 150 million shares outstanding and the current price is C$0.02, XYZ may choose to do a rollback say a 1 for 10. Shareholders would then have 1/10 the number of shares with a share price of C$0.20. Frankly, I hate to see rollbacks because inevitably the share price continues to decline. Actually I have been known to sell shares on the news of a rollback and then repurchase them at lower prices in a few weeks or months, assuming I still like the company. If we could only get a major rally in the juniors it would take a lot of pressure off and at least if additional funds were needed they could be raised at substantially higher prices and with fewer shares being issued. With my large portfolio of shares and warrants there are naturally a few such companies in the situation described above. So far, I have continued to hold the shares for different reasons, i.e., management, good properties, etc., with the strong belief the companies will survive and eventually their shares will be sold at substantially higher prices. But a rally soon would be great! And I think it is coming very soon. ### Dudley Baker Dudley Baker is the owner/editor of Precious Metals Warrants, a market data service which provides you with the details on all mining & energy companies with warrants trading on the U.S. and Canadian Exchanges. As new warrants are listed for trading they alert you via e-mail. You are provided with links to the companies' websites, links to quotes and charts, tips for placing orders and much more. Precious Metals Warrants do not make any specific recommendations in their service. They do the work for you and provide you with the knowledge, trading tips and the confidence in placing your orders. Disclaimer/Disclosure Copyright ©2005-2010
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