So it’s official: the claimed Borealis tech wonders are worth less than nothing.
Here’s how I know.
Think of Borealis (BOREF) as a wallet with a bunch of things in it: an electric motor the size of a water melon that can drive a jumbo jet around like a golf cart . . . a hoped-for revolutionary way to make cheap solar panels . . . and on and on.
One of the things in the Borealis wallet is 5.4 million shares of stock in a company called Roche Bay Mining.
When it last traded, a share of Roche Bay (RCHBF) fetched $11.50. (The ask, yesterday, was $13.60 if you were buying; someone was bidding $11 for shares if you were selling.)
Borealis was $10 a share (or $9.50 if you were selling).
Borealis is divided into exactly 5 million shares.
Depending on what you got on you math SATs, this may be starting to come into focus.
Each of the 5 million Borealis shares in effect ‘owns’ 1.08 of the 5.4 million Roche Bay shares (in much the same way that three kids would each own two slices of a six-slice pizza, only in this case it’s 5 million kids and a 5.4-million-slice pizza).
So each Borealis share – which you can buy for $10 – owns $12.42 worth of Roche Bay shares. (That is: 1.08 shares at $11.50 each).
Which makes all the other stuff in the Borealis wallet worth . . . minus $2.42.
That’s not a high price to pay for a stake in what could conceivably be revolutionary new technologies. If Roche Bay is valued right (a big if), the market is in effect giving you $2.42 to take a chance on the rest.
Note, first, that there is absolutely no practical value in knowing any of this.
If these stocks were like real stocks – stocks that trade tens of thousands or millions of shares every day – you might consider buying Borealis shares and shorting a like number of Roche Bay shares, in the hope that, over the long-run, you would likely come out ahead as the prices came back into whack.
(Of course, as the geniuses at Long-Term Capital learned [and they really were geniuses], being right over the ‘long run’ doesn’t help if you get busted by market perversity before the long run arrives.)
But these stocks are not like real stocks that trade lots of shares every day. They are Pink Sheet stocks with giant spreads and very low volume. So forget it.
Note second, that the market could conceivably be right in its estimation. The stock prices may actually be in whack. You could have a situation where Roche Bay itself did nicely – maybe even paid out big dividends. But where Borealis took those dividends on its 5.4 million shares and siphoned them down the rat hole.
But that said, here’s what I’m thinking. I’m thinking, first, that according to Boeing and Air Canada’s chief pilots, they really did produce a prototype electric motor that moved the plane – so, yes, these guys may be dreamers with zero practical business experience, but they may also be honest.
And then I’m thinking, well, if they’re honest, maybe they really do have the giant iron ore deposit they claim to have on the edge of Eastern Canada.
And if they do, there’s a not entirely crazy chance it will be worth billions of dollars.
Even at $1 billion, that could be $100 per Roche Bay share. (Right now, there are about 8 million Roche Bay shares outstanding, but more would presumably have to be issued to finance development of their mine.)
So it’s a nutty, risky speculation and I may lose my money. But I ain’t selling my Borealis for $10 a share.
Quote of the Day
We're not trying to outsmart the smart guys. We're trying to sell bonds to the dumb guys.~alleged remark of the head of a Wall Street mortgage-bond group
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