Next Cap Raise - for Sophisticated Investors
Published 14-OCT-2023 13:00 P.M.
9 minute read
Yesterday we wrote a looong article all about our helium Investment NHE.
Earlier this week NHE announced they had completed some repairs on their drill rig and are now doing the final prep prior to starting drilling.
7 years in the making and NHE is so close to drilling its first well at its giant helium project in Tanzania.
We are betting that NHE’s Managing Director Justyn Wood will be able to pull off a “string of pearls” discovery like he did with Hardman Resources all those years ago.
(It took ages to pull this article together, it's long, but definitely worth a weekend read.)
On the same day as the NHE “rig repaired” announcement, IVZ announced that they are 1,966m into their 3,750m drill campaign, and preparations have commenced to drill into their primary targets...
Another “years in the making” moment about to happen.
It should be an exciting few weeks ahead.
We just wish NHE and IVZ would stop announcing things on the same day... not good for the nerves.
In other news... small cap placements in bear market conditions?
We have been talking a lot about participating in more placements recently, while the market is down trodden and stocks are beaten up.
We have had some interest from readers to also participate in placements and other capital raisings.
So we have started a new mailing list - let’s call it... ummm, how about “Next Cap Raise”.
When we get offered a placement or participate in a deal, we will try to get an allocation for the Next Cap Raise mailing list.
Unfortunately, ASIC regulations and the Corporations Act 2001 require that only certified s708 “sophisticated Investors” are allowed to see or participate in placements, pre-IPOs and seed deals.
So you will need a valid s708 certificate to get on the Next Cap Raise mailing list for these deals.
(Sorry, these are the ASIC and Corporations Act section 708 rules.)
If you qualify as a certified s708 sophisticated Investor and are interested in s708 only seed deals, pre-IPOs and placements, register on the link below.
You will need to upload a valid s708 certificate to subscribe.
We’ll probably share a couple of deals per month.
The first deal will be announced this Tuesday 17th October:
So what exactly is a s708 Investor anyway?
(We are not lawyers. Please take this simplified explainer as our personal interpretation of the rules only.)
As laid out in Section 708 of the Corporations Act 2001 (Cth), the term “Sophisticated Investor” describes a category of investor that can be offered securities (deals) without needing a prospectus or other regulated disclosure documents.
The rationale behind this classification is that Sophisticated Investors — also often referred to as "high net worth individuals" and "s708 investors" — are considered to have sufficient investment knowledge and experience to make informed decisions regarding a new offer of securities without requiring the protection of a prospectus.
What Criteria is used to Identify Sophisticated Investors?
To satisfy the requirements for being classed as a Sophisticated Investor, you will have either:
- A gross income for each of the last two financial years of at least $250,000; or
- Net assets of at least $2.5 million.
Qualifying as a Sophisticated Investor means increased access to investment opportunities.
It ALSO means the “sophisticated investor” forgoes all the enforceable protections for retail investors under the Corporations Act designed to reduce risk of making poor investment decisions.
Basically, sophisticated Investors are allowed to be offered “spicy” investment opportunities with minimal disclosure documents, that aren't usually available to retail investors.
These deals can come in the form of pre-IPO offers, start-ups, hedge funds, property syndicates, and unlisted opportunities like capital raisings or seeding opportunities for private companies.
These kinds of early stage opportunities have the potential to deliver high returns, but it should be noted that they are also high risk, complex, illiquid (can’t be sold on an open market) and most importantly, don’t offer investors the protections of a full disclosure document (like an IPO prospectus)..
For example, s708 only seed and pre-IPO deals can turn very bad, very quickly compared to owning shares that are already listed on the stock exchange.
We’ve invested in a bunch of “sophisticated investor only” pre-IPO deals over the years that never made it to IPO, and just ran out of money and shut down... taking our investment to zero.
We started trading ASX small cap stocks over 20 years ago, investing the minimum allowed $500 that we could afford into high risk, African oil & gas explorers (read more on how we got started).
It took us 17 years from when we first started (and many expensive market lessons) to finally get to the asset base to qualify to get our sophisticated investor certificate.
Sophisticated investor deals can be a double edged sword, when they work out they are great, but when they don’t work out there is a very good chance all your money will be gone.
The other important thing to note is that once a person qualifies as a sophisticated Investor, they forgo all the enforceable protections for retail investors under the Corporations Act designed to reduce their risk of making poor investment decisions.
Sign up to the Next Cap Raise mailing list to see some sophisticated investor only deals (must submit a valid s708 certificate).
A wrap up of the week
Big drilling catalysts crawling closer to conclusion
It was a big week on a number of different fronts, but first a look at our oil & gas exploration companies with imminent drilling on the horizon.
The three companies are:
- Invictus Energy (ASX:IVZ): is currently drilling its second well into a 20 trillion cubic feet + 120 million barrel oil unrisked prospective resource in Zimbabwe.
- Noble Helium (ASX:NHE): is days away from drilling its first well at its helium project in Tanzania targeting a 15.3 billion cubic feet unrisked prospective helium resource.
- Elixir Energy (ASX: EXR): is about to drill an appraisal well into its QLD gas project, targeting a ~395 billion cubic feet contingent gas resource.
7 years in the making and NHE is close to drilling its first well at its giant helium project in Tanzania.
We wrote a deep dive on the NHE story with a comprehensive overview of the project, management and helium market.
Click here to read our deep dive: NHE about to drill the world’s largest prospective helium resource.
This week IVZ provided an update on its drilling program, with the company reporting higher background gas, better reservoir quality and heavier hydrocarbons so far.
The company will also penetrate the two main targets before reaching a total depth (which we expect to be sometime in November).
Click here to read our deep dive on this news: IVZ about to drill main targets.
Two other oil & gas exploration hopefuls in our Portfolio provided material updates on the progress of imminent drilling.
This week 88 Energy (ASX: 88E) also provided an update on its Alaskan Portfolio, announcing that it had a rig contracted and long lead items ordered.
The Hickory-1 flow test well will now be scheduled for Q1 2024.
Grand Gulf Energy (ASX: GGE) also put its hand up for a late entrance to the oil & gas race announcing that it has contracted Welsh Engineering to provide services for the upcoming drill campaign.
We always like it when one of our Portfolio companies has a big drilling event imminent because, depending on the result, these catalysts could make (or break) a company.
🎓 To learn more about how we invest for share price catalysts read: What is a share price catalyst?
Biotechs continue to deliver in down market
With our 2022 Biotech Pick of the Year Dimerix (ASX: DXB) closing the week at ~$0.17, it appears that the biotech October run still has legs to run.
We will be attending the AusBiotech conference at the end of the month with Portfolio companies DXB, NTI and ALA all presenting.
This week we had two of our biotech investments announce material progress.
On Monday, Emyria (ASX:EMD) commenced dosing its first patient in an MDMA - Assisted Therapy clinical trial.
The goal of the trial is to build upon a growing base of evidence that indicates MDMA is effective at treating patients with PTSD.
We see one potential outcome of this clinical trial - that is, “payer-style” deals, where EMD secures commitments from large organisations to cover the expensive cost of treatment.
Click here to read our deep dive on this news: EMD Doses First Patient in MDMA Clinical Trial
Later in the week Arovella Therapeutics (ASX:ALA) acquired a new technology that (hopefully) upgrades its existing cancer fighting technology to more effectively target solid tumours.
With this technology, ALA hopes that it will be able to target a range of hard-to-kill cancers like Pancreatic and Gastric cancer.
ALA’s strategy is to licence the most promising technologies in the cancer immunotherapy space from the brightest minds in the business - and to build upon its existing cancer-fighting platform and take a drug through to Phase I clinical trials.
Click here to read our deep dive on this news: New Deal: ALA can now target lung cancer, pancreatic cancer, gastric cancer.
New beginnings for our small cap resource stocks
This week our 2023 Small Cap Pick of the Year Solis Mineras (ASX:SLM) announced that it had acquired new lithium tenaments in Brazil, while walking away from its initial project.
We think that this was the right call by the company, given the large potential US$3.7M ($5.77M) payment to exercise the option over the project, and the lack of drilling results to support further exploration at that price.
With new tenaments in hand, and a drilling program just four weeks away, we look forward to seeing what SLM can do with this new ground.
We have now published a new SLM Investment Memo, read our full take here: SLM to drill new Brazil lithium project in 4 weeks.
It’s the job of the company and its management to identify opportunities for shareholder value - even when it appears to be a pivot away from its core project.
And if this means walking away from promising a prospect to preserve capital, looking for other projects to develop, or seeing how to best utilise an existing project for an “in demand” commodity - we back them to make that call.
Quick Takes 🗣️
Macro News - What we are reading 📰
Have a great weekend,
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S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
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