A Checklist of Key Factors to Consider:

1) Net Proceeds from the offering - How much money will the company ACTUALLY receive? ( look at the commissions generated from the finders fee..should be NO MORE than 10% on ANYTHING over 1 million )

2) Use of proceeds - How does the company plan on spending the proceeds of the offering?

3) Dilution of Value - How much dilution of the common shares already issued and o/s will result from the offering?

ie.: Before Private Placement, ABC Company had 1,000,000 shares o/s, trading at let's say, $1.00 per share, providing a Market Cap of $1,000,000 dollars.
After Private Placement ( of let's say 1,000,000 additional shares ), ABC Company now has 2,000,000 shares o/s.......BUT GUESS WHAT?!?!?....ABC's market cap is the same, $1,000,000 dollars, however they'll now be trading at 0.50 cents.....do you get it now? So...if you had a position in ABC before they announced their PP.... you just got DILUTED by 50%!!!!

4) Data on Management and/or the Promoter - Just WHO is behind "your" company? Other factors include:

*What is the caliber and experience of the management team and/or the promoter(s) (this is VERY IMPORTANT)

*How successful is the exploration track record of management and/or promoter(s)

*What percentage of ownership in the company does management and/or promoter(s) hold? ( SUPER DUPER IMPORTANT )

5) Location and Development - Where is the Company located? Where do they conduct their business? Where is the current offering being made public? ( over sea's, local....?)

There you have it class....we're all finished ( for now.....)

So, now you know.... when a company announces a PP... it's a good/bad thing all rolled up into one.... Good for the Company ( as their "kitty" is now full of cash, hence, good for future investing)......but can be BAD if you're already invested, as dilution takes its effect.

This article was written by Placer_foot of StockHidoeut.com Penny stock investing site to help members when buying penny stocks.