To the S-1 Filing which doesn't contain all of the key information yet, specifically, what price we will be able to purchase stock at:
Based on what is available, this is what will happen -
At whatever date they choose, all shareholders on that day will be given Two Subscription rights for each share of stock they own. You don't have to do anything with those rights. It is your choice to take advantage of them or let them go without taking action. So lets do the math here. Lets say you own 100k shares. You now have 200k subscription rights.
Each subscription right will give you the ability to purchase two shares of GIGL stock at a set price. The money you are spending to purchase those shares is going directly to the company. This is how the company will raise the money. So back to the math. You have 200k subscription rights, which if exercised, will provide working capital to GIGL and will in return give you 400k shares.
If the company does not hit their $5 million dollar goal, and some investors have chosen not to purchase the shares they are eligable for under the Subscription rights, Those rights will then be offered to investors who purchased all of the shares they are entitled to and wish to purchase more.
Now the magic question is... What price will the shares be offered at. I think most would agree that there will be a discount offered. I would assume 20%, maybe 30%. That is what you're getting for investing in the company. Much in the same way a private placement would work. If I called the company and wanted to invest 1 million dollars, I would not pay full price, I would get a discount to the trading price. I do not see anything in the S-1 which states that the shares will be restricted. So they could be sold upon issuance, although that could change in the final offering.
This will absolutely increase the number of shares outstanding, and while this would be dilution, it is nothing like what they have seen in the past. Also, the fact that they are selling these shares to shareholders only should prevent any major selling once the shares are issued.
They could have gone out and found a company that would have given them a line of credit which would exchange cash for shares (Research Elite Pharma deal with LPC for an example of this.) In this case, the shares would be dumped immediately because the company would not want to hold them.
They could have gone out and raised money from a private investor. Lets use Jillian Michaels as an example. If she wanted to give Joey 5 Million Cash. She would be getting atleast the same 20%-30% discount I mentioned above. While the shares could be restricted in this case, I suspect Joeys track record has probably made this difficult.
They are going to raise this money through people that they believe will not dump the shares immediately. They are looking to current shareholders, because they believe that their current shareholders will not invest this extra money directly in the company, then sell the shares right away. Depending on the pricing set forth in the S-1 once it is finalized, there is the possibility of adding between 50 million to 100 million shares to the share count. However, they will not be added to the float unless investors decide to dump them. The shares will be held in the strongest hands possible, The longs who still believe in and support the company.
For this to work, the company needs to release news, show progress, and begin to deliver on some of their promises. If they could bump the share price up to .10 before this offering happens, it would be substantially less dilutive. I almost wish they announced this when the stock was at .25.
Assuming they announce some news and get the share price up, when all is said and done.. The company will have $5 Million in cash to open up a few new locations. There will probably be about 200 million shares outstanding. All new shares issued will be held by investors who are very unlikely to dump them into the market and knock down the share price.
It's a creative way to raise money for sure. Now if Joey can just PR an actual accomplishment and get the share price back over a nickle at minimum, and a dime preferably, they will have a shot at this. Otherwise, an offering like this at a penny or two.. or even sub penny will double or triple the share count and you might as well bury this thing at that point.
Hope that helps!
Based on what is available, this is what will happen -
At whatever date they choose, all shareholders on that day will be given Two Subscription rights for each share of stock they own. You don't have to do anything with those rights. It is your choice to take advantage of them or let them go without taking action. So lets do the math here. Lets say you own 100k shares. You now have 200k subscription rights.
Each subscription right will give you the ability to purchase two shares of GIGL stock at a set price. The money you are spending to purchase those shares is going directly to the company. This is how the company will raise the money. So back to the math. You have 200k subscription rights, which if exercised, will provide working capital to GIGL and will in return give you 400k shares.
If the company does not hit their $5 million dollar goal, and some investors have chosen not to purchase the shares they are eligable for under the Subscription rights, Those rights will then be offered to investors who purchased all of the shares they are entitled to and wish to purchase more.
Now the magic question is... What price will the shares be offered at. I think most would agree that there will be a discount offered. I would assume 20%, maybe 30%. That is what you're getting for investing in the company. Much in the same way a private placement would work. If I called the company and wanted to invest 1 million dollars, I would not pay full price, I would get a discount to the trading price. I do not see anything in the S-1 which states that the shares will be restricted. So they could be sold upon issuance, although that could change in the final offering.
This will absolutely increase the number of shares outstanding, and while this would be dilution, it is nothing like what they have seen in the past. Also, the fact that they are selling these shares to shareholders only should prevent any major selling once the shares are issued.
They could have gone out and found a company that would have given them a line of credit which would exchange cash for shares (Research Elite Pharma deal with LPC for an example of this.) In this case, the shares would be dumped immediately because the company would not want to hold them.
They could have gone out and raised money from a private investor. Lets use Jillian Michaels as an example. If she wanted to give Joey 5 Million Cash. She would be getting atleast the same 20%-30% discount I mentioned above. While the shares could be restricted in this case, I suspect Joeys track record has probably made this difficult.
They are going to raise this money through people that they believe will not dump the shares immediately. They are looking to current shareholders, because they believe that their current shareholders will not invest this extra money directly in the company, then sell the shares right away. Depending on the pricing set forth in the S-1 once it is finalized, there is the possibility of adding between 50 million to 100 million shares to the share count. However, they will not be added to the float unless investors decide to dump them. The shares will be held in the strongest hands possible, The longs who still believe in and support the company.
For this to work, the company needs to release news, show progress, and begin to deliver on some of their promises. If they could bump the share price up to .10 before this offering happens, it would be substantially less dilutive. I almost wish they announced this when the stock was at .25.
Assuming they announce some news and get the share price up, when all is said and done.. The company will have $5 Million in cash to open up a few new locations. There will probably be about 200 million shares outstanding. All new shares issued will be held by investors who are very unlikely to dump them into the market and knock down the share price.
It's a creative way to raise money for sure. Now if Joey can just PR an actual accomplishment and get the share price back over a nickle at minimum, and a dime preferably, they will have a shot at this. Otherwise, an offering like this at a penny or two.. or even sub penny will double or triple the share count and you might as well bury this thing at that point.
Hope that helps!
