Macro Tsimmis

intelligently hedged investment

BPZ Energy (BZP) update #6

Posted by intelledgement on Wed, 19 Mar 08

BPZ Energy (BZP) is taking advantage of the strong market for their stock to raise $40MM of capital via the sale of 2MM shares of common stock. The sale was announced yesterday, and pricing was revealed today.

Dilution is a way of life for the speculator. Most promising companies with growing businesses that have the potential to deliver outsize ROI for shareholders are constantly in need of funds to capitalize their growth, and selling more shares—thus diluting the holdings of existing shareholders—is usually the most expedient mechanism. It avoids increasing the company’s debt levels and obviates the need for lengthy and sometimes prickly negotiations with lenders and the inconvenience of concomitant limitations on how the funds can be deployed.

With the sale of these new shares, the company will have about 76MM shares outstanding, which is about 40% more than the 54MM shares that were outstanding as of 30 Mar 07. Of course the PPS that day was $6 and today BZP closed at $20.36…so if you are speculating with the right growth stock, any dilution is apt to be perfectly palatable.

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