December 7, 2005

TORAH! : For the young and/or the forgetful, Torah! is the Japanese word for attack!  Japanese pilots said it to signal their very highly successful, surprise attack on Pearl Harbour, December 7, 1941. That attack stirred the US giant into entering into, and very significantly affecting, the outcome of World War II.  Today, exactly 64 years after that date, I am reading details of Cassidy's attack on most of what ails it. Coincidence or Kismet?  

A POT OF GOLD : The most satisfying result of today's reported action is that management freed itself of the need to be constantly "standing on the street looking for handouts".  At last, Cassidy has launched a serious attack on arranging the funds needed! I don't know whether any Torahs! were sounded. But, in one swoop, management also addressed a multitude of other conditions that retarded growth in share price. Now, with $4 million immediately in kitty, (maybe even $6 million if "the greenshoe fits") and with the promise of a further up to $9 million to be invested if good results continue to accrue, that pot of gold is much better assured.

GETTING IT UP : The principal problem in getting Cassidy's shares to reflect indicated potential was probably the raising of risk capital from a too narrow group of shareholders. Ancillary problems arose out of too vigorous efforts to minimize dilution of the shareholders. Highly significant achievements were announced at the ends of programs of work. The better it got the more work expense was justified.  But my suspicion is this. Some core shareholders reached the limits of their risk acceptance for Cassidy stock. But, wishing to protect their levels of shareholding they sold shares to raise amounts that were reinvested in the "just enough" fundings. Of course, such selling, saturated the small market following which results partly from the large number of shares held by a few. Such selling on the heels of announcement of good news caused share prices to be depressed. The general market measures success only in terms of share price. When it saw this happen it discounted the reported results as being "not good". The better things got, the more program was needed and the worse the share price looked. Just look at the stock chart over the past 3 years!  Now with new money in and fixed, management can devote more time to finding gold and telling the world about it. 

KEEPING IT UP:  The strongest argument one can make about the underlying merits of the stock is the fact that the largest funding done so far. was arranged at almost a 15% premium above the "going" share price at the time the deal was under negotiation.   This is the second time that the "smart money" recognized the wisdom of investing in Cassidy's treasury stock at a price higher than the "great hurried herd" was willing to pay. Cassidys managers have obviously been able to communicate with sophisticated investors.

My second observation is "Hooray, they are going to let a broker make some money (and do some work and  risk some reputation)."  Most of the funds used by Cassidy were raised on the basis of the personal reputation of President Gillis. Gillis, a careful man with others' money, has saved Cassidy between a half and one million dollars in commissions on the past offerings. But because he didnt let the brokerage community in, most sales reps and analysts concentrated on their "tied in house" financed companies.  You can't feed too many brokers and their families on only the commissions generated from a small cap company, especially one where most of the shares are tightly held. Now, with Jennings capital having a vested interest in and staking its reputation on Cassidy share price, I look to the stock to be reflecting more of the undoubted potential. The increase in capitalization also should, logically, lead to an increase in liquidity to make the shares attractive to a greater range of investors.

My third observation is that it a lot of stock changed hands today on the floor of the exchange, at a per share price higher than the later announced underwriting price. Significantly, many transactions were executed by Cassidy's underwriter, Jennings. That tells me that, for whatever persuasion, there are buyers willing to pay a significant premium over yesterday's share price. Moreover, usually the underwriter for a small cap company such as Cassidy, first beats the share price down, and then insists on a further 10% discount. I consider that the recent trading history is a further indication that the tide has turned for Cassidy (and probably other successful junior explorers) share prices. The rise of gold price to a 20 year high and the almost daily announcements of a frantic pace of acquisitions of gold juniors by the majors will help in getting and keeping those share prices up.                  

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Disclosure Statement 

 Edward Zederayko is a shareholder of Cassidy Gold. He is not an insider of the company.