I haven’t been feeling well lately so I apologize for not replying to some. I’m very confident that Justfactsmam is not Loanranger. Their writing style is completely different for years. I shared JFM’s post because he’s a lawyer and has experience in how long the DD phase usually takes. I’m sorry that’s FUD to you. The purpose of me sharing the VC term sheet article is the bolded part. I believe it applies to biotech deals as well.
https://www.investorshangout.com/post/view?id=5225751
I didn’t make up the term toxic financing or death sprial for preferred stock. Here are my sources.
http://coralcapital.com/toxic-financing-explained/
https://en.m.wikipedia.org/wiki/Death_spiral_financing
I was simply pointing out the negative aspect of such financing option and I expected it to be viewed as FUD or bashing here. Recent developments haven’t been positive. With Leo missing all three milestones and not explaining why, please forgive me for not cheering like Alan and praising Leo for playing his hand masterfully.
I expect the deal to be at least $1B with $50M-$100M upfront and double-digit royalty. The deal really needs to happen before the option to buy back preferred shares and cancel warrants expires. I’m not going to speculate what happens if there’s no deal this year because it’ll be criticized as FUD or bashing again.
Quote:Good investors won’t issue a term sheet until their business diligence is done and they are very confident that they want to do a deal with you.
The best way to keep a steady pace on both sides and march towards an expedited close is to set a firm closing date early in the process with your legal team and communicate to your lead VC and her legal team.
https://www.investorshangout.com/post/view?id=5225751
I didn’t make up the term toxic financing or death sprial for preferred stock. Here are my sources.
Quote:A toxic financing is convertible debt or preferred stock that allows the financier, the holder of the debt or preferred shares, to essentially receive an unlimited number of free trading common shares when they convert their debt or preferred shares to common stock.
http://coralcapital.com/toxic-financing-explained/
Quote:Many small companies rely on selling convertible debt to large private investors (see private investment in public equity) to fund their operations and growth. This convertible debt, often convertible preferred stock or convertible debentures, can be converted to the common stock of the issuing company often at steep discounts to the market value of the common stock. Under the typical “death spiral” scenario, the holder of the convertible debt initially shorts the issuer’s common stock, which often causes the stock price to decline, at which time the debt holder converts some of the convertible debt to common shares with which he then covers the debt holder's short position. The debt holder continues to sell short and cover with converted stock, which, along with selling by other shareholders alarmed by the falling price, continually weakens the share price, making the shares unattractive to new investors and possibly severely limiting the company’s ability to obtain new financing if necessary.
https://en.m.wikipedia.org/wiki/Death_spiral_financing
I was simply pointing out the negative aspect of such financing option and I expected it to be viewed as FUD or bashing here. Recent developments haven’t been positive. With Leo missing all three milestones and not explaining why, please forgive me for not cheering like Alan and praising Leo for playing his hand masterfully.
I expect the deal to be at least $1B with $50M-$100M upfront and double-digit royalty. The deal really needs to happen before the option to buy back preferred shares and cancel warrants expires. I’m not going to speculate what happens if there’s no deal this year because it’ll be criticized as FUD or bashing again.
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