Most exploration companies have no revenue. They raise money by issuing new shares, often with warrants attached, every year or two. Enter the company's current share structure and a proposed financing to see the effect.
What the numbers tell you
Dilution is not automatically bad. Money raised at a higher price than the last round, spent on drilling that adds real value, can leave shareholders better off. What hurts is repeated raising at falling prices, heavy warrant coverage that caps the stock's upside, and a short runway that forces the next raise at a weak moment.
- Runway under 12 months means another financing is likely soon. Its price will depend on results between now and then.
- Warrants with a strike near the market price tend to create selling pressure as holders exercise and sell.
- A share count that doubles every few years needs discoveries that grow even faster to keep each share's value rising.
Read the full guide: dilution and financings.
Common questions
Why use fully diluted shares?
Warrants and options can turn into shares. If the company succeeds and the stock rises, they will be exercised, so valuing a company on basic shares alone overstates what each share is worth.
Where do I find the share counts?
The latest financial statements and MD&A on SEDAR+ list shares outstanding, warrants and options, usually in the share capital note. Recent news releases announce new financings.
Sources
Educational content only, not investment, tax or legal advice. The Stateside Report does not recommend buying or selling any security. Tax rules depend on your situation; confirm with a qualified tax professional. Full disclosures.