HOLD ON! Powertech shares plummet 14% on Toronto Stock Exchange, 16% on Frankfurt
$58.8 million CAD of shareholder value wiped out in less than 15 weeks
Posted September 16, 2008
(Note: All amounts are in Canadian dollars.)
Powertech shares took a beating on Tuesday, a day when the spot price of uranium dropped 4% to US $62.00 a pound and when the unfolding of the investment banking implosion on Wall Street dominated the financial news. The 14% drop on the Toronto Exchange and the 16% decline on the Frankfurt Exchange extend the stock's three month losing streak. In early June, Powertech shares were at $1.50, and 6 million shares were issued to Belgian company Synatom in return for a cash infusion of $9 million.
The share price has dropped $1.06, or 71%, since the private placement with Synatom was closed on June 4. Synatom's unrealized loss stands at $6.36 million. The Belgian company was granted two seats on the Powertech board, and it is unknown whether the Belgians support the Centennial uranium project in Weld County. Opposition to the Centennial Project is a factor in the decline of Powertech's stock since late 2007, as acknowledged by a Powertech official.
Powertech's market capitalization, or the value of its outstanding shares, has dropped to only $24,388,769. Nearly $60 million of shareholder value has evaporated in less than four months. If the decline continues, Powertech may risk delisting from the Toronto Stock Exchange. Delisting citeria are here.
Powertech's $24.4 million market cap is well below its total assets and stockholder equity on its most recent balance sheet. The company's unaudited June 30, 2008 balance sheet shows total assets of $42.5 million and stockholder equity of $39.4 million. Taking a closer look, however, reveals that Powertech's assets include many costs that would be expenses, not assets, under U.S. generally-accepted accounting principles.
Under Canadian GAAP, mineral exploration costs are considered to be assets. As a result, Powertech's assets include such things as land services, legal fees, claims maintenance, lease payments, drilling, engineering, permitting, wages, and consulting. In contrast, U.S. GAAP requires that most of these mineral exploration costs be shown as expenses in the period they are incurred. If Powertech was listed on a U.S. stock exchange, its assets and stockholder equity would be a small fraction of the amounts shown on its latest balance sheet.