Finlay Minerals is just coming off the wire from closing a $1.67M private placement. Good news, right? More cash in the treasury. But before everyone rushes off to start their plug-ins, let’s slam the brakes for a second. Did they truly obtain the greatest value possible for shareholders, or did they simply go with the easiest option?

Warrants: Future Goldmine or Shareholder Drain?

This placement is riddled with warrants. Each NFT unit consists of one common share and one common share purchase warrant exercisable at $0.20 until June 2027. Plus, finder's warrants with the same terms. That’s a lot of dilution potential muscle memory around existing shareholders.

Think of it like this: it's like selling future potential at a discount. If Finlay hits paydirt, those warrants will go through the roof in value. Holders will have the opportunity to purchase shares at a price significantly discounted from current market value! That’s great news for private equity investors! It’s a hard luck story for those who stuck with the equity game through the turmoil of deep geological exploration. It is indeed theft, as they’re stealing potential upside from the most loyal of shareholders.

It's a double-edged sword. True, I guess it might make warrant holders more likely to exercise earlier if the stock price appreciates, generating additional cash. But it inserts a new degree of complexity and uncertainty. It’s financial chicken – with your own stock price.

Exemption: Convenience or Missed Opportunity?

Finlay used the listed issuer financing exemption. Easy peasy, right? Less paperwork, faster closing. Was it the best choice?

Larger firms have the resources to comply with more stringent requirements, and smaller companies largely benefit from this exemption. It allows them to bypass requiring a prospectus and greater regulatory scrutiny. It's convenient, no doubt. It narrows the field of would-be investors. Would Finlay have found bigger, more strategic investors with a full roadshow? Investors that could have provided more favorable terms and contributed more than cash to the deal?

It’s the junk food option compared to the healthy choice. It inundates you, but in the process you are losing out on something much healthier and more fulfilling.

The political leaning here is important. Are regulators truly protecting the little guy investors? Or are they making it easier for these companies to continue raising more money while diluting current shareholders? This isn’t an anti-growth agenda, this is doing the right deals, on the right terms and raising responsible capital.

Insider Buys: Confidence or Self-Interest?

CFO Gordon Steblin participated in this placement. He bought 200,000 shares. On the surface, that looks good. Insider purchases are generally viewed as a vote of confidence. Let's not be naive.

He knows the company better than anyone. He’s well aware of the potential upside, sure, but of the risk. Was this a real vote of confidence? Or was it a clever tactic to purchase shares at a deep discount given the warrants he receives, which further sweeten the offer?

Additionally, the dependence on exemptions from formal valuation and minority shareholder approval under MI 61-101 is concerning. While legal, it begs the question: Is this truly fair to minority shareholders?

It’s as if in a poker game only one player has access to know all the cards. The other players can still win, but the deck is clearly stacked against them.

This placement is reminiscent of the dot-com boom. During that boom, companies were able to raise money quickly, sometimes with little more than a promise of eventual profit. They all lost money, burned shareholders with dilution and cash consumption and eventually went up in smoke. I'm not saying Finlay is destined for the same fate, but it's a cautionary tale.

The use of proceeds is key here. They say it's for exploration. Fine. But how is this exploration going to turn into shareholder value? Does it result in some important scientific or medical advance that outweighs the dilution? Or will it be a repeat of past drilling with too little to go around?

Ultimately, this private placement is a gamble. But it might very well pay off handsomely if Finlay forges a modest yet profound breakthrough. However, SB 56 has serious repercussions for current shareholders as well. Before you cheer this financing, ask yourself: are you truly benefiting, or are you just being diluted into oblivion?

This isn't just about Finlay Minerals. In response, junior mining companies are favoring less dilutive and easier financing options. Sadly, this trend is not in the long-term best interests of their shareholders. It’s long past time for a level-headed discussion on corporate governance and responsible means of raising capital on the current state of the mining industry.