Gran Colombia Gold (GCM.to) and the power of share consolidation
My thanks to A. Reader for the nudge on this little note, which can be subtitled “A lesson in what poor management, excessive financial debt and over-promise/under-deliver can do for your share price”.
Even before the end of 2012 it was clear that Gran Colombia Gold (GCM.to), the Serafino Iacono trainwreck of a mining company, had plenty of problems because its share price had already tumbled by around 80% since the start of 2011. But instead of going for the big numbers its shares traded for the in 2009 to 2011 period, I’m going to go for the modest 35c share price it typically traded during most of and at the end of 2012.
Then in mid-2013 GCM announced (15) a 25-to-1 share consolidation. In other words, if you owned 25 shares of GCM, that was suddenly converted into one share.
Life went on though the next three and a half years until this week, when the company announced (16) it had received shareholder approval to run another share consolidation, this time 15-to-1. Yes, those shares you owned before that were shrunk 25 times have just been shrunk another 15 times or in other words, if you owned 375 shares of GCM at the beginning of 2013, in just a few days’ time that will be down to just one share, no buying or selling.
As GCM is currently trading at-or-around 10c, when the 15:1 rollback is official we can reasonably expect each single share to be worth $1.50. So let’s do a little theoretical calculation by imagining this reasonable situation:
- At the end of 2013, you bought 3,750 shares of GCM at 35c apiece.
- Due to the double effect of the two rollbacks since then, those 3,750 shares have become just 10 shares.
- At the time, you paid approximately $1,312.50 for your share.
- They are now worth $15.
And if you think that’s bad, consider how much money Frank Holmes lost for his Global fund when he waded bigtime into GCM stock in 2009 and 2010 (and also told everyone else to do the same on many many occasions), paying a typical $2.50 to $3 a share at the time.
Finally, do of course expect a big round of promo pumping on the back of the consolidation when it’s finalized so do yourself a big favour; make a note of the people telling you that GCM.to is a great opportunity, having that little list to hand may save you a lot of money in the future.
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Here's a little ditty that was for subscribers last Sunday. You'll be unshocked and unsurprised to learn that one of the financial whores being paid to pump this to you in the enar future is Tommy Humphreys of CEO.ca.
Gotta love Fino