Morningstar | Eldorado Gold Completes 5:1 Share Consolidation; No Economic Impact to Company. See Updated Analyst Note from 03 Jan 2019
Eldorado Gold completed a previously announced 5:1 share consolidation, reducing its total share count from roughly 794 million shares to 159 million shares and increasing its current share price by 5 times to more than USD 3 per share and CAD 4 per share, respectively. Prior to the consolidation, Eldorado’s low share price had put it in violation of exchange rules. The company is now compliant with share price requirements to continue listing on the New York and Toronto Stock Exchanges, respectively.The share consolidation has no economic impact on the company. As such, our forecast and the underlying fair value estimate of the company is unchanged. However, our fair value estimates increase by five times to reflect the reduced share count. Our U.S. dollar-denominated fair value estimate is now USD 10 per share, compared with USD 2 per share previously. Our Canadian dollar-denominated fair value estimate is adjusted by more than 5 times to CAD 13.50 per share from CAD 2.60 due to a weaker Canadian dollar since our last update. Eldorado’s no-moat rating is unaffected.
Although shares currently trade at roughly 60% discount to our fair value estimate, we reiterate our extreme uncertainty rating. The company's operational exposure to Greece has an outsized impact on its value, and future cash flows from Greek projects remain highly uncertain. Therefore, although potential upside from successful developments in Greece is substantial, the stock should still be approached with caution by potential investors.
Eldorado Gold is engaged in the exploration, development, mining and production of gold and other mining resources in Brazil, China, Turkey and Greece.
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