What were these investment bankers thinking?

Peter Hodson, Financial Post Published: Saturday, February 09, 2008

I have never been an investment banker. But if I were one today, there are a few things I would be wondering about in the market, and more than a few financing deals where I would be questioning my investment banking brethren's homework. Let's take a trip down investment banker lane:


As an investment banker, I would be wondering how many times Crystallex International Corp. (KRY/TSX) would be raising money. On Jan. 25, Crystallex, which is trying to develop a gold mine in Venezuela, announced intentions to raise $60-million with a unit offering at $2.10 per unit.

Nothing interesting in that, except looking back at recent financings, I see that the company raised $53-million (at $4.25 per share) in April, 2007; $32-million (at $3.20 per share) in August, 2006; $100-million (at $4 per share) in April, 2004, and in December, 2004, raised $100-million in a bond issue (9.375% coupon).

That's a total of $345-million raised, with all stock issues done at higher prices than current. The company still doesn't have all its permits to build its gold mine, and the stock hit a new low of $1.78 this week, down 22% this year and down 52% over one year.


Noting all of the confusion above, I think I am happy to be on the buy side of the Street instead of the banking side.

peter@sprott.com - Peter Hodson is a senior portfolio manager at Sprott Asset Management.