Quit Assuming Investors Are Idiots

I have a plea to CEOs of public companies, and especially royalty companies.  Quit assuming your investors are idiots.  

If you assume your investors are idiots your company will start doing things that don't make sense in the name of pleasing shareholders.  I'd like to offer an alternative: do the right thing for maximizing returns, then explain why you are doing it to your shareholders.

I'll lay it out more simply.

Step 1 - Do the right thing.

Step 2 - Explain why it was the right thing.

Sandstorm Gold

September 27th, 2022 Sandstorm did a bought deal for around $80m at a discount to the current market price.  The dilution is around 5-6%.  Here's the market reaction:

Now, this isn't the part where Sandstorm treated shareholders like idiots.  Issuing stock to pay down debt may be a good capital allocation decision.

The Fed has been raising interest rates, which is raising Sandstorm's interest rates.  That might be enough to justify the discounted dilution to existing shareholders.  Your job as a company is to MAKE THAT CASE TO YOUR SHAREHOLDERS! Talk about how the basecore portfolio acquisition was strategic enough to take on debt for, but that the company needed to deleverage a bit now and this was a painful but necessary capital raise.

The part where Sandstorm treated their investors like idiots is when two days later they declared a dividend!

By my math that dividend cost the company $5.6m.  But the cost of that capital came dearly.  Literally two days before they were diluting shareholders issuing stock at below market prices.  That is nuts!  You should not pay dividends with cash raised by dilution.  

It's the kind of decision a company makes if they think investors will only buy them if they have a regular dividend.  It's not the decision a company makes if they are trying to maximize returns.  Instead Sandstorm should have canceled the dividend and made the case that they leveraged up for the basecore acquisition and would resume paying a dividend when they were able to reduce that resulting debt load.  Sandstorm should have treated investors like they weren't idiots.

Vox Royalty


as previously disclosed in Vox’s filing statement dated May 12, 2020, no royalty cashflows are payable to Vox until this pre-payment amount has been exhausted. The outstanding balance as at December 31, 2020 was A$1,782,032. Vox has entered into a binding agreement with Yilgarn Iron Pty Ltd pursuant to which Vox will extinguish the outstanding balance of the Koolyanobbing pre-payment through a cash payment of A$1,782,032

Vox Royalty also treated their investors like idiots by buying out a pre-payment.  It was returnless risk where Vox paid $1.7m upfront to potentially get $1.7m in revenue later, with 0% interest.  Vox made the argument that investors weren't properly valuing the royalty because it wasn't generating revenue to them.  There is no world in which it can be argued that this money had good return on capital, at best it would get 0% return, realistically it would have been better to stick it in the bank where it could at least get interest.

Vox should have made the argument to it's investors that Koolyanobbing was paying Yilgarn Iron and would soon pay them.  Then spent the cash on something that would have real returns.


I am currently a shareholder of $SAND purchased in the public market. I have never received any compensation from any of the companies mentioned.