Canada, Canadian Mining Companies, gambling, Haiti, Majescor, Majescor dilutes stock again, Majescor Resources, micro cap, Mining Haiti, MJX, Penny Stock Mining, penny stock tricks, penny stock tricks. stock consolidation, Quebec, Ressources Majescor, reverse split, reverse stock split, stock, stock consolidation, stock merger, Strateco, TSX, uranium mining
Majescor’s Latest Reverse Stock Split: 10 stocks at one half cent become one stock at 5 cents, based on last closing price.
This is the second time in less than 5 years. This appears an act of desperation to make their stock look better and to save themselves from being delisted. It makes them look better because they have fewer stocks outstanding and at a higher price. However, this effectively allows them to continue to devalue the stock by issuing new “private placements” of stock, as they have done in the past to keep afloat:
“Majescor Resources Inc.: Resolutions Approved at the Shareholder’s Annual and Special Meeting” Montreal, Quebec–(Marketwired – Oct. 18, 2013) – ‘Majescor Resources Inc. (‘Majescor’ or ‘the Company’) (TSX VENTURE:MJX) held its Shareholders’ annual and special meeting on October 17th, 2013 in Ottawa at 11:00 a.m…..the shareholders have approved the consolidation of the Company’s common share capital on the basis of one (1) post-consolidation common share for every ten (10) pre-consolidation common shares held (subject to exchange acceptance); the number of Common Shares of the Corporation issued and outstanding will be reduced from 92,044,410 shares to 9,204,441 shares. It is the Board of Directors’ opinion that the Corporation’s existing issued and outstanding Common Share structure is not conducive to securing additional equity financing and that a restructuring is warranted in order to facilitate attracting new investments to the Corporation. Implementing the restructuring process in a timely manner will also put the Corporation in a much stronger position to take advantage of potential value-added opportunities.” http://www.marketwired.com/press-release/majescor-resources-inc-resolutions-approved-shareholders-annual-special-meeting-tsx-venture-mjx-1842639.htm (bold added for emphasis)
Mining Investor Money
In fact, Majescor has been in business since 1999. While they have done some exploration, we have found no evidence that they ever mined anything other than investor money! Generally their stock has been in constant decline over time, with a couple of exceptions along the way created by hype related to “new” mining properties. While it appears that Majescor has mostly had bad luck, can any company really have such bad luck for 14 years?
In fact, the reverse stock split was predictable, as we observed this summer. Majescor continued to sell stock “private placements” in order to raise money for inflated salaries and for a bit of exploration work. This has the same effect as printing money — the more stocks in circulation, the lower their value tends to be. Thus, reverse stock split allows them to have fewer stocks in circulation and to have those fewer stocks at a higher value, until they too decline in value.
What does that mean? It means that if you had ten shares of stock you only have one now. Not so long before the announced split the price had rebounded from one half cent to one cent, probably due to stock holder confusion about Majescor announcing on Oct. 1 that it was selling off its royalty in a Brazilian diamond mine. After announcement of the reverse split it went up to one cent for a couple of weeks, presumably until people understood that this was bad news. It has remained at one half cent since November 1, so presumably this will be the baseline for the reverse split. This liquidation of assets appears a sign of Majescor’s desperate financial straits, as does the reverse split. In business since 1999 Majescor appears never to have mined a thing. They have only issued new stock. The stock thus has continuously dropped in value to a recent one half cent. See old web sites at: http://archive.org/web/ ; historic values: http://www.morningstar.com/invest/stocks/342061-mjx-majescor-resources-inc.html and “Majescor Announces Sale of 1% Royalty on Brauna Diamond Project, Montreal, Quebec–(Marketwired – Oct. 1, 2013)” http://www.marketwired.com/press-release/majescor-announces-sale-of-1-royalty-on-brauna-diamond-project-tsx-venture-mjx-1836823.htm
Previous Reverse Stock Split & Investor Losses
Majescor engineered a reverse-split of the stock, at least one other time, approved 2 December, 2008, whereby “one (1) post-consolidation common share” was given “for every ten (10) pre-consolidation common shares held.” While this reverse-split was during early parts of the financial crisis, that doesn’t make it better for the investor.
On January 31, 2002 Majescor stock was worth $17.50 Canadian.
Those who bought 100 stocks at $17.50 on January 31, 2002 would have paid $1,750 which by 31 October 2008 was only worth 10 cents per share, i.e. 100 times 10 cents or ten dollars. Majescor did a reverse stock split in 2008. Shareholders were given one new share per 10 old shares. That means that the theoretical person who bought the 100 shares then only had 10 shares. On the 22 of May 2009 a few months after the reverse split Majescor stock was worth 15 cents. So, the person would have only had 10 stocks (instead of the original 100) worth 15 cents each (rather than $17.50) or $1.50 (one dollar and fifty cents) worth of stock instead of the $1,750 they originally invested. The same stock has recently hovered between one half cent and one cent. Thus, the original $1,750 has been worth between 10 cents and even five cents.
With the new reverse stock split of today, shareholders will again be given one stock per ten stocks. This means instead of the 100 stocks which our theoretical stockholder bought in 2002, they will now have one stock only. Based on Majescor’s last closing at one half cent then the stock should open at 5 cents today. So, a $1,750 investment in 100 stocks slightly less than 12 years ago would now be one stock worth 5 cents. However, since Majescor has generally declined, with few reprieves the one stock will most likely soon be worth one penny or less again.
Had the person placed their $1,750 in the bank with a one percent interest, in January they would have $2,011.58. With Majescor they will most probably have one penny. Which clearly demonstrates the risks of investing in penny-small-cap stocks.
A stock holder who had bought 100 stocks on Majescor’s most recent peak value of $3.65, on March 1, 2007, would have paid $365.00. After the first reverse split, on the 22 of May 2009 they would have had 10 stocks worth $1.50. Thus they would have lost $363.50 of their $365.00. On Wednesday they had 10 stocks worth one half cent. Today with the new reverse split they will have one stock worth 5 cents of their original 100 stocks. Had they invested their $365.00 in a bank at 1% interest by next March they would have had $391.33. Instead they will likely have half a cent of their original investment. Many people will not even bend down to pick up one cent off of the ground these days. For more examples see the Wikipedia article at the bottom of this post.
If you go to the graph at Morningstar for Majescor and move the little dot around you can see the exact date and stock value at each point. (You can even see that on January 31, 2002 Majescor stock was worth $17.50 Canadian, which didn’t show up in the Wayback Machine.) http://www.morningstar.com/invest/stocks/342061-mjx-majescor-resources-inc.html For instance: On 31 October 2008 the stock was worth 10 cents. The December 31, 2008, presumably after the reverse split took effect, it was worth 11 cents. However, that means that the old stock was actually worth about one cent, due to one share replacing 10 shares. On 22 May 2009 the stock was worth 15 cents, meaning the old stock would have been worth 1.5 cents per share. The peak after the reverse split was 37 cents, on 29 September 2009, which would be 3.7 cents for the old shares. We thought that it had gone up to 50 cents sometime in 2012, but if it did it was so short-lived that it is not showing on the chart, and this would have been only 5 cents for the old shares. And, from the last high of 37 cents, per post-consolidation share, it has been mostly in decline, with some small ups and downs.
Another Possible Trick: Pulling a Rabbit from the Hat
Another possible ‘trick’ that Majescor can use in order to pump up stock prices is to stake a claim someplace in Canada, for instance. Now it isn’t even necessary to go to the location to stake a claim which makes what might be too difficult due to lack of infrastructure really too easy: “Map staking’ is being developed and is gaining usage in provinces or regions of provinces where the territory is surveyed. Claims can then be recorded on a map directly at the mining recorders’ office without the prospector ever having visited the location on the ground. Elsewhere, claims must actually be marked out on the ground, using marked wooden corner posts and boundaries cut through the forest.” Any prospect which is staked requires both fees and a certain amount of investment per year, which takes a lot of money: “In addition, a certain amount of assessment work must be done each year to keep claims in good standing. For example, all jurisdictions require that claim holders carry out geological mapping of their mineral holdings, a specified amount of diamond drilling, or a specified value of other work. Copies of geological maps, reports, drill logs and the like must be submitted to the mining recorder.” http://www.nrcan.gc.ca/minerals-metals/policy/legislation-regulations/3707
So, beware if Majescor comes up with a new property. They will have to get financing from some place to do the appropriate work. In the past that has meant selling more shares as “private placements” which has led to price devaluations.
To make a point of problems associated with staking a claim in Canada, some people decided to stake a claim on Mont-Royal in the center of Montreal. This is actually a cemetery and so would actually be a good place to find gold or silver as old Nazis or grave-robbers could tell you (in people’s teeth). Subsequent to this stunt, some protections were put in place for Mont-Royal: “Mont-Royal to become Open-Pit Mine?
Gold-digging Royal Or stakes claim in heart of Montreal
June 9, 2009 by Martin Lukacs
Montreal–The RoyalOr mining company formally staked a claim to large portions of Parc Mont-Royal – smack in the centre of Montréal – on May 11, announcing plans to develop a major open-pit gold mine.” “…..In the days leading up to the staking claim action, organizers with the Québec Coalition on the Socio-Environmental Impacts of Transnationals in Latin America (CQISETAL) hoped the stunt would make Montrealers understand the adverse effects of unregulated mining.” Entire article here: http://www.dominionpaper.ca/articles/2643
Ethical Reasons Not to Invest or to Divest from Majescor
The mining which they propose in Haiti will cause deforestation, and poison waters and agricultural land, in a country which already suffers from deforestation and food shortages. The properties are also exceptionally low grade ores. In Haiti, with fruit trees, you can have food and trees together. Majescor has also been involved with Strateco in uranium mining projects in northern Quebec. These projects are opposed by the indigenous people and others. Worse, this proposed uranium project is at the hydrological center of Quebec and would hence poison most of the water in this huge province. Thus, there is currently a uranium moratorium in the Province. Majescor’s nasty partner Strateco is suing the Province of Quebec’s Minister of the Environment to try to force what they call advanced exploration but is actually a test mine.
Additionally, wherever you live there is a good chance that your tax monies have gone or are going to reforest Haiti or to feed the people. So, why would you invest in this or any other company which has proposed to undermine both?
Reverse Stock Split as explained by wikipedia:
“On a stock exchange, a reverse stock split or reverse split is a process by a company of issuing to each shareholder in that company a smaller number of new shares in proportion to that shareholder’s original shares that are subsequently canceled. A reverse stock split is also called a stock merge.The reduction in the number of issued shares is accompanied by a proportional increase in the share price . New shares are typically issued in a simple ratio, e.g. 1 new share for 2 old shares, 3 for 4, etc. A reverse split is the opposite of a stock split.
Typically, the stock will temporarily add a “D” to the end of its ticker during a reverse stock split. Sometimes a company may concurrently change its name. This is known as a name change and consolidation (i.e. using a different ticker for the new shares).
There is a stigma attached to doing a reverse stock split, so it is not initiated without very good reason and may take a shareholder or board meeting for consent. Many institutional investors and mutual funds, for example, have rules against purchasing a stock whose price is below some minimum, perhaps US$5. In an extreme case, a company whose share price has dropped so low that it is in danger of being delisted from its stock exchange, might use a reverse stock split to increase its share price. For these reasons, a reverse stock split is often an indication that a company is in financial trouble. A reverse stock split may be used to reduce the number of shareholders. If a company completes reverse split in which 1 new share is issued for every 100 old shares, any investor holding less than 100 shares would simply receive a cash payment. If the number of shareholders drops, the company may be placed into a different regulatory category and may be governed by different law—for example, in the U.S., whether a company is regulated by the SEC depends in part on the number of shareholders.
From time to time, companies will issue a reverse split concurrently with a forward split. A forward split is rarely undertaken independently of a reverse split. Note that in reverse and forward splits, the shareholder’s old shares are erased, as they receive a number of new shares in proportion to their original holdings. By contrast, in a simple stock split, the original shares remain on the exchange as shareholders receive additional shares based on their existing holdings. In both stock splits and reverse splits, the share price is adjusted in proportion to the increase in shares to maintain equal value.
As an example of how short splits work, ProShares Ultrashort Silver (ZSL) underwent a 1-10 reverse split on April 15, 2010, which grouped every 10 shares into one share; accordingly, this multiplied the close price by 10, so the stock finished at $36.45 instead of $3.645. On February 25, 2011, ZSL had a 1-4 reverse split (every 4 shares became one share, which multiplied the close price by 4, to $31.83). Because of these two actions, one share of ZSL as of February 26, 2011 represents 40 shares of ZSL before April 15, 2010. These splits were necessary to maintain the price of the fund, whose value fell 90.2% from April 15, 2010 to April 21, 2011, and over 98% since December 3, 2008. Had the reverse splits not taken place, ZSL’s closing price on April 21, 2011 would have been $0.3685, rather than $14.74, or .3685*40.”
http://en.wikipedia.org/wiki/Reverse_stock_split (references at link)