We seem to forget the number of posts from earlier, proclaiming that we will never see high value for our shares, because of the number of shares outstanding. Funny how when the company provides a solution, the same people start saying that this is a very bad thing.

There are also others that say the SP will have to raise 60% from here to get back to $0.12 a share, which is possible from $0.07, but getting to $1.20 from $0.70 is much harder. The logic here is flawed.

The only way that the SP will rise is on good news. It won't matter whether the SP is $0.07 or $0.70 at that point. SP is derived from a simple mathematical formula:

SP = Market Cap / Shares outstanding

It is the market cap devided by the number of shares. For exploration type companies, the market cap is defined by the market, based on the resources that are discovered. So, if the market decided that the value of a future SPQ find (diluted by JV) is $100 million, then our market cap will increase approximately 6 fold.

Whether that means an increase in SP from $0.07 to $0.42 or $0.70 to $4.20 will depend on the number of shares.

What seems to be of the most concern to posters is the downside. Shares will have the potential to fall from $0.70 to $0.07 again. However, this would mean a drop in Market Cap to $1.6 million, which is well below the amount of money in the bank, as well as the value of the property we have.

Many reverse splits have gone bad, as Nortel can attest. But was it the RS or the crappy management in a troubled company that was the cause? Here is an objective STUDY on the fates of companies that went with reverse splits. Have a read.

I am sure that the directors have looked at future private placement requirements as well. Drilling costs a lot of money, and Spider and KWG have been actively poking holes in the ROF since March. Raising capital will be much easier at a higher SP than a lower one. With the SP litterally at pennies, there will be less interest from major investors.

Less shares outstanding will also mean that supply of available shares will be more scarce. This should have the effect of increasing the SP, as demand outstrips supply.

Myself, I will be voting AYE for the resolution, which is giving the opportunity for the company to take the action at the most beneficial time, not necessarily making it a reality immediately.