Remember this post and this post, both from May 2009? The ones where we laid out all the inside stock sales going on at MAG Silver (MAG.to) (MVG) and saying “WTF?”. What we have here is a bunch of directors that fist dumped that batch of shares on the market, then once the stock drops on the news that nobody wants to buy their badly run company any longer they grant themselves a whole new bunch of options at lower prices.
|Jun 29/09||Jun 23/09||Harris, Jody Lynn||Direct Ownership||Options||50 – Grant of options||4,219||$5.320|
|Jun 29/09||Jun 23/09||Neal, Gordon||Indirect Ownership||Options||50 – Grant of options||41,178||$5.320|
|Jun 29/09||Jun 23/09||Megaw, Peter||Direct Ownership||Options||50 – Grant of options||10,938||$5.320|
|Jun 29/09||Jun 23/09||MacInnis, Daniel Thomas||Direct Ownership||Options||50 – Grant of options||12,344||$5.320|
|Jun 29/09||Jun 23/09||Carlson, Eric||Direct Ownership||Options||50 – Grant of options||15,469||$5.320|
|Jun 29/09||Jun 23/09||White, Derek Christopher||Direct Ownership||Options||50 – Grant of options||9,961||$5.320|
|Jun 29/09||Jun 23/09||Hallam, Frank||Direct Ownership||Options||50 – Grant of options||46,348||$5.320|
|Jun 29/09||Jun 23/09||Jones, R. Michael||Direct Ownership||Options||50 – Grant of options||9,141||$5.320|
On May 22nd I said “sell MAG Silver” when it was trading at C$6.18. Today is June 30th and the stock is C$5.16…and it’s still a sell. Seriously, who’s going to buy this PoS except for Fresnillo? MAG.to has no exit strategy lined up and because of that it hardly matters if they’ve found the lost city of El Dorado. In this article a week or so ago, Toby Shute of Motley Fool (Shute is the smart exception that proves the mediocre rule over there) nailed the situation; here’s the last paragraph, but go read the whole thing, cos he’s right.
There’s a broader lesson to be learned here for investors in mining juniors. When your corporate exit strategy focuses on selling out to a major like Vale (NYSE: VALE) or BHP Billiton (NYSE: BHP) or Barrick Gold (NYSE: ABX), you might want to make sure that there’s more than one likely bidder. Without that, you lose loads of leverage.