Flow-through shares, what many don't know
posted on
Feb 02, 2010 07:31PM
Creating shareholder wealth by advancing gold projects through the exploration and mine development cycle.
For sure there are investments that the average Joe just can't be part of or are already over subscribed by the time they become known or available.
A big part of flow-through shares are basically marketed as a tax product and nothing more. Check out Mineral fields LP for instance. A accountant could contact a client who does not even have a clue about small cap investing and has a huge tax problem and have them buy these shares offered through an offering memorandum. You basically don't have a clue as to where the money is invested as it really goes into a pool. Most don't care they just get their deduction. If there is money made at the end then it is seen as a bonus. Much like the poor people who got sucked into buying Venture capital funds like the defunct Crocus fund in Manitoba. Marketed on tax benefits not returns. Never do this!!!!
There is no doubt for those who actually own the shares outright they may dump them. For others they don't know and that decision is up to some of these LP funds.
Personally I like to see insiders loading up. Shows confidence. Also non-brokered PP as the investors usually have a long-term view on the company. Brokers especially in down markets tend to churn their clients investments to earn commissions (ya they got to eat too).
Therefore I take a less dim view on insider activities to a point. They are the ones who put in "sweat equity" and have to be rewarded. We can all buy and sell and nobody knows. For them it eventually becomes public information. You can only hide behind the "anonymous" house curtain for so long. Sometimes insiders support their own stock and really don't want to buy at that time but their bids get taken out. If they run out of money then they can't support the SP when needed. Insiders having dry powder has its benefits in down markets.
Everybody draws their own conclusions on insider selling. If you asked them they don't have to tell you as it is not a crime and are totally able to do so. But most will provide you with a logical explanation if you ask. In many cases this time of year it is a tax installment payment.
BBOB