As you know I wrote about why I sold all of my shares in Veris Gold. However, because the company released the news about defaulting on the Deutsche Bank loan, I am receiving a lot of email about doing an update. Here is what I think will happen. Whether the stock price will increase or decrease from here will depend on the number of shares printed.
The loan will get worked out. Either Deutsche Bank will sell the $80 million loan to someone else at a deep discount because now the loan is in default or the major shareholders restructure it. But then there is another $50 million of liabilities. How do they get restructured? If it is all equity, then the company will need to print 500 million shares at $0.10 per share plus 250 million of warrants. This would mean that the total number of shares would go back to 1 billion.
Now depending on what you think that company is worth, you can take your estimate and divide it by the number of shares.
$1 billion/1 billion shares = $1 per share
$500 million/1 billion shares = $0.50 per share
$100 million/1 billion shares = $0.10 per share
I don’t know if they are planning on printing this many shares, but I just don’t see a scenario without more equity. It is just a matter of how much and at what price.