Traders got excited about Atlanta Gold Inc. (CVE:ATG) (PINK:ATLDF) on Thursday when the company mentioned they will be offering stock and warrant units for sale.
ATG added 15.4% on Thursday supported by a trading volume of 9 million which was significantly above the average of 371 thousand. It was the busiest trading day for the past year.
The key catalyst for the price spike was the company’s announcement stating they are going for a $2.5 million non-brokered private placement. To attract funding, Atlanta Gold will offer up to 35.7 million units each priced at 7 cents. Units will consist of one common share and on warrant for a common share convertible at 11 cents for two years from closing of the offering.
For the current shareholders such a proposal means possible dilution of up to 56.8%.
The company needs the money to meet exploration, developing and permitting expenditures mainly from their Atlanta gold property in Idaho. At the current stage the offering also remains subject to stock exchange approval.
For short term traders the news doesn’t bear a lasting effect. Until the deal is closed this jump in price doesn’t have the necessary backbone to continue.
