This comment not much to do with your thread - it is interseting that director S A Mellnick involved some funny trades in the co, according to the history. Latest: in March 2007 he bought 2 mill shares @ 1480 cps and sold them on the very same day @ 1440 cps - how's that for blowing R800k and brokers fees. Or is there something about financial planning that I do not understand? NOW: if there is not a reasonable explanation for this move, it brings doubt in my mind that this man should remain a director at this co.
From http://www.moneyweb.co.za/mw/view/mw/en/page38?oid=81346&sn=Detail Peregrine CEO Sean Melnick sold 2m shares for R28,8m last week but matched the sale with a purchase of 200 000 futures on the shares for R29,6m. "It was purely a funding transaction", he explained to Moneyweb, "The family trust wanted to make an investment. Rather than borrow against shares that I have in Peregrine, I decided to borrow 2m shares at a cost of 0,5% from an institution. "I sold those to raise the cash we wanted for our investment but opted to maintain my exposure to Peregrine by taking a futures contract. Because one is dealing in the wholesale market, it works out at one or two percentage points cheaper than borrowing from a bank. Moreover, with shares as security, the bank would want four or five times cover. This way, I got access to the entire R28,8m. "I am exposed if the shares go down and in that event, will have to put up margin."