I'm a novice investor and ran across something that I don't understand. I own shares of Aureus and recently found this notice;
On June 15, 2016, Aureus announced a private placement (the "Private Placement") with MNG Gold. The Private Placement to MNG Gold consists of two tranches.
-- Tranche 1: 59,533,674 common shares at a price of 3.21p (US$0.045302)(approximately Cdn$0.058447) per common share and a promissory note in the aggregate principal amount of US$12,303,006 (the "Promissory Note"), for aggregate gross proceeds of US$15 million (Cdn$19.3 million); and -- Tranche 2: 331,111,209 common shares at a price of 3.21p (US$0.045302) per Share for aggregate gross proceeds of US$15 million (Cdn$19.3 million), to be completed upon clearance by the Toronto Stock Exchange ("TSX") of certain personal information forms.
So I understand that this will basically double the amount of outstanding shares. Wouldn't this generally cause prices to drop? What factors would hold a price steady when there is dilution?
Edit: Additional information purchase is at about 6 cents per share, current sell price is 8 cents per share. As a part of Tranche 2 CEO, CFO, and half of directors being replaced. Maybe management shakeup has buoyed confidence to make up for poorer fundamentals.