It’s pretty easy for investors to get disgruntled when they see a company they’re invested in selling shares at prices lower than current levels, but that’s all too often the way it goes with funds, institutions, etc. getting preferential rates to provide capital.
U3O8 Corp. (TSX: UWE)(OTCQB: UWEFF) is at least giving its existing shareholders an opportunity to pick up shares and warrants to buy more shares in the future at the low end of a recent trading range.
The Toronto-based mineral explorer is tapping into an Existing Shareholder Prospectus Exemption (ESPE) approved by the TSX in 2015 in a bid to raise $250, 000 for operations.
The offer is, of course, dilutive with at least 10 million shares being distributed at a price of 2.5 cents as part of a "unit." The unit includes one common share of UWE, as well as one half a warrant. Each warrant gives the owner the right to buy a common share of U3O8 at five cents per share over the next 2-1/2 years, meaning another five million shares could potentially be issued in the future.
The offering stipulates that if shares of the Toronto-based company trade for over seven cents for 20 straight days, management has the right to accelerate the exercise date of the warrants, shortening it to 30 days from the notice or else the warrants will be forfeited.
The offering has specifications, including record dates of ownership and country residency restrictions as to people available to participate in the raise. U3O8 has provided more information of who qualifies on its website.
Management intends to use the proceeds to refine and optimize metallurgical test work on its Laguna Salada Uranium/vanadium deposit in Argentina, driving down estimated production costs and general administrative purposes.
In a bid to clean up U3O8’s share structure, shareholders approved a 20-for-1 reverse split last week at the company’s Annual and Special Meeting. On that front, U3O8 director Dr. Keith Barron exercised 2.85 million out-of-the-money warrants for gross proceeds to the company of $99,750. Another unnamed shareholder last week also voluntarily allowed 19.3 million warrants be cancelled, a move Richard Spencer, U3O8 President and CEO, described as "in the broader interest of other shareholders."
Utilizing the ESPE, shareholders are given "an opportunity to cost-effectively increase their shareholding in [U3O8] prior to the capital restructuring," the company said in today’s news release on the matter.
Shares of UWE have been trading daily between 2.5 cents and three cents since May 8, following trading as high as 5 cents in January. Shares closed Tuesday at 2.5 cents and were trading at three cents late Wednesday morning.
