Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?

[petec]

Dundee has agreed to sell 20m shares in DPM at 6.35 and warrants for a further 10m at 8.

C$127m to Dundee and $C207m if the warrants are exercised.

[bskptkl]

They upsized DPM offering to 24 million units for proceeds of $152 million. If the $8 warrants are exercised, they would have only 30k DPM left.
Impressive. I thought they would hang around and collect DPM dividends for years.
Cash could be over $175 million after this transaction - $1.75 per share.
Earnings after close tomorrow.

What will they do with the cash?

[petec]

I’d guess at a common stock buyback and investments in mining small caps, which are crapped out.

I’d go so far as to say that Jonathan Goodman has not put a foot wrong - but the most difficult part, which is restarting growth, is yet to come.

[petec]

Notably the $8 warrants are only valid for 12 months so Dundee keep upside above 8 if it takes longer than a year to get there. Quite a smart deal structure.

[doc75]

I’d guess at a common stock buyback and investments in mining small caps, which are crapped out.

I’d go so far as to say that Jonathan Goodman has not put a foot wrong - but the most difficult part, which is restarting growth, is yet to come.

Why do you guess common buyback over prefs?  I'd imagine an SIB for the prefs before a common buyback, given that it decreases cash outlay going forward.   I *hope* something is in the works with respect to their capital structure.  I'm expecting that COVID is also forcing them to put more capital into some of their bigger operating businesses.   

[bskptkl]

I’d guess at a common stock buyback and investments in mining small caps, which are crapped out.

I’d go so far as to say that Jonathan Goodman has not put a foot wrong - but the most difficult part, which is restarting growth, is yet to come.

Why do you guess common buyback over prefs?  I'd imagine an SIB for the prefs before a common buyback, given that it decreases cash outlay going forward.   I *hope* something is in the works with respect to their capital structure.  I'm expecting that COVID is also forcing them to put more capital into some of their bigger operating businesses.

The preferred shares are permanent capital with no covenants and a reasonable rate. I wouldn't SIB them, maybe pick them off a little by little. The common however - that I would SIB a boatload - say $75 million buyback at $1.50 per share? That could retire half the shares outstanding.

[doc75]

I’d guess at a common stock buyback and investments in mining small caps, which are crapped out.

I’d go so far as to say that Jonathan Goodman has not put a foot wrong - but the most difficult part, which is restarting growth, is yet to come.

Why do you guess common buyback over prefs?  I'd imagine an SIB for the prefs before a common buyback, given that it decreases cash outlay going forward.   I *hope* something is in the works with respect to their capital structure.  I'm expecting that COVID is also forcing them to put more capital into some of their bigger operating businesses.

The preferred shares are permanent capital with no covenants and a reasonable rate. I wouldn't SIB them, maybe pick them off a little by little. The common however - that I would SIB a boatload - say $75 million buyback at $1.50 per share? That could retire half the shares outstanding.

Yes, sorry, my question was about what Dundee *would* do (given that they want to continue extracting their salaries and rebuild the empire), not what they should do to maximize shareholder equity.

Agreed that the prefs are permanent capital. I wouldn't expect them to repurchase near par.  But they do continue to drain liquidity so I could see them making an SIB somewhere in the 7-8% yield range.   

I'll be both pleased and surprised if they commit to a large-scale commons buyback. 

[petec]

They talked about doing a common buyback after they converted the series 5 prefs, but never had the cash.

Now they have a boatload of cash.

[Rod]

I doubt there will be much buyback activity for some time. The common is cheap but not necessarily cheaper than other investment opportunities they have. And the prefs are actually expensive relative to other safer prefs IMO, many of which trade around $10. The prefs have run up to $15 seemingly on speculation of a large imminent tender offer. I don’t think management is going to feel obligated to reward this “front running”. I expect they will wait for them to drop back. I sold all my B and D prefs.

[petec]

Other safer prefs IMO, many of which trade around $10.

May I ask which?