Metalla Royalty & Streaming (TSE: MTA) acquires and manages precious metal royalties, streams, and similar production-based interests.
The company recently announced that it will raise up to US$50 million using an at-the-market equity program. Essentially, the company will sell shares a little bit at a time on the open market during market hours at its discretion. It will do this through BMO Nesbitt Burns (TSE: BMO), which is the lead agent, along with PI Financial and Scotia Capital (TSE: BNS).
The company plans to use the proceeds to fund the future purchase of streams and royalties and for general working capital purposes.
However, it’s important for investors to remember that equity financings are dilutive to shareholders. An investor’s stake in a company shrinks every time new shares are issued. Indeed, with a current market cap of C$319 million, the US$50 million is equivalent to roughly 20% of the market cap at a currency exchange rate of C$1.27.
Considering that the company is not profitable, I’m not convinced that this move would create any value, let alone make up for the 20% dilution.
Metalla Royalty Insider Transactions
Insider transactions of Metalla Royalty have been fairly balanced over the past year, with a roughly even number of Buys and Sells.
According to the TipRanks Insider Confidence Signal, insiders are neutral on the company, although slightly less confident than the sector average.
Metalla Royalty Analyst Recommendations
Turning to Wall Street, Metalla Royalties has a Hold rating based on just one Hold rating assigned in the past three months. Metalla Royalty’s price target of C$12 implies 67.6% upside potential.
Final Thoughts
Although the analyst covering this stock has a C$12 price, it’s hard to justify that price target considering the expected dilution and lack of profitability. It’s also worth noting that the price target was issued prior to the announcement of the equity offering.
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