Jamie Keech should be ashamed of himself and deserves to go bankrupt for the cheap stunt he pulled, all for a few thousand dollars. His scheme to use his own subscribers to create a liquidity event was cooked up in order to do exactly the below: Transfer all risk from the sly and dump it on the shoulder of naive greenhorns. The following is an excerpt of the coverage of Steve Common Thief Zuker’s Pucara Gold (TORO.v) in IKN594, out last weekend:
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Now for the final subject of the three and last week’s report got one thing badly wrong; the assumption that TORO.v would be a buyable stock when it opened for trading. As the 40c IPO qualifying transaction had been oversubscribed, it was always going to trade at some sort of premium, but my supposition…
“Let’s guess TORO opens for trading next week at around 50c, that values the company built up around those assets at something North of $30m. That’s good leverage, but…”
…looks rather silly compared to frenzy that hit the IPO and saw it open at an insane C$1.50. We now know the opening had been primed by one of the outlets that had placed its own subscribers into the IPO, also it was aimed at the company’s free list (where junior mining sector greenhorns tend to lurk), but even so there was enough solid buying pressure all week to keep the stock at basically a double. With that in mind, some context:
- In March this year, TORO was attempting to raise $3.5m to complete its IPO before Covid-19 suspended the process. As it turned out, TORO’s eventual $8.5m raising filled to overflowing but that’s the price of gold changing; nothing changed in the rocks at Lourdes or any other of the assets in 2020.
- Some more context: Kuya Silver (KUYA.cse) also IPO’d last week and while trading successfully closed the week at $1.40, some 25c lower than its scrips (see below). Aside from the obvious FOMO whipped up by the marketing there was little reason to bid up an exploreco IPO in the way that TORO.v saw.
The risk involved with this company (it’s a drill play!) has not changed, what changed is the burden of that risk. Those in the IPO funding round at 40c are now able to sell half their shares and ride the others, totally risk free, but that risk hasn’t just disappeared; Instead it’s transferred to the buyer who has now taken on, unwittingly or otherwise, the double risk of theirs plus somebody else’s. That may or may not be crazy depending on what TORO.v manages to drill out of Lourdes, but witnessing the way in which less sophisticated investors were steered into this stock when others are immediately cashing out doesn’t merely state too much risk, it screams it out loud from rooftops. To consider just one manifestation of this risk, once the first bloom of new buyers are positioned TORO will need news flow to maintain momentum. By my reckoning, with its team scheduled to arrive in Peru mid-October and quarantine rules meaning they are not on-site until early November, TORO may be able to get first drill assay result or results back at some point in December as long as the organization is sharp and the drilling goes well however, even in a best case the first substantial news from the company is at least two months away. Then Peru closes down for Christmas, then it’s the uplands rainy season which coincides with the January/February summer vacation season. As it happens, other companies have arranged to keep drilling through the Andean uplands rainy season this year (e.g. Regulus) so that might happen, but even if a lot of things go perfectly for TORO in the next three months, substantial news flow is going to be thin on the ground. Those who bought at the crazy prices of last week bought that lull and there are only so many virtual conferences one can do. So people who bought TORO stock at 80c last week bought somebody else’s risk as well as their own. It doesn’t mean they cannot walk away with a winner (after all, its market cap of around $50m this weekend is still slightly lower than “the next Yanacocha”), however it does mean they have bought unwittingly into a tilted playing field.