You bet. Disclaimer, I am not 100% knowledgeable
Post# of 155253
(Total Views: 652)
Posted On: 09/24/2020 4:17:23 PM
Re: chazzledazzle #57719
You bet. Disclaimer, I am not 100% knowledgeable about all of the ins and outs.
But essentially the last fundraising round we did, had an strike price on the stock that was used as collateral, of $10 a share. Meaning that the investor could, at their discretion, decide to sell a limited amount of shares per month to recoup their investment.
They earned points (a fee upfront that was tacked onto the loan), and are currently earning interest.
If the share price goes above $10, its in their interest to start selling shares, as they will increase their profit. Conversely the company is encouraged to repay the debt as fast as they can to minimize the dilution. With the share price below $10, the lender is encouraged to hold and accrue interest.
The ratchet provision allows the strike price to be lowered to match the strike price if we sign a subsequent finance offer with another entity. So, if we offered them say $5 strike price, then the existing lender would ratchet down to $5.
Others have stated that if we sell shares, in an offering, that it would also trigger the ratchet to whatever we offer shares at (which is likely to happen in conjunction with uplisting) I have not confirmed this piece to be true.
The concern is that if we need to sell some shares to uplist, that the cost of triggering the ratchet would be painful. (as essentially it almost triples the amount of shares allocated against this loan.)
I am hoping, that if the amount needed is small enough, we can find an alternate route that does not trigger the ratchet.
But essentially the last fundraising round we did, had an strike price on the stock that was used as collateral, of $10 a share. Meaning that the investor could, at their discretion, decide to sell a limited amount of shares per month to recoup their investment.
They earned points (a fee upfront that was tacked onto the loan), and are currently earning interest.
If the share price goes above $10, its in their interest to start selling shares, as they will increase their profit. Conversely the company is encouraged to repay the debt as fast as they can to minimize the dilution. With the share price below $10, the lender is encouraged to hold and accrue interest.
The ratchet provision allows the strike price to be lowered to match the strike price if we sign a subsequent finance offer with another entity. So, if we offered them say $5 strike price, then the existing lender would ratchet down to $5.
Others have stated that if we sell shares, in an offering, that it would also trigger the ratchet to whatever we offer shares at (which is likely to happen in conjunction with uplisting) I have not confirmed this piece to be true.
The concern is that if we need to sell some shares to uplist, that the cost of triggering the ratchet would be painful. (as essentially it almost triples the amount of shares allocated against this loan.)
I am hoping, that if the amount needed is small enough, we can find an alternate route that does not trigger the ratchet.
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