There are a couple of ways to look at it (at least
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Posted On: 12/18/2020 8:25:15 PM
There are a couple of ways to look at it (at least):
1. The negative view is that we are issuing stock at $3.40 while it is trading at $4.99 Call it dilution (the horror)! You could also call prior communication from management misleading (e.g. we are raising money at $10.....followed by repaying the loan (which already included a significant OID) with shares at $3.40). I think that is fair (that prior communication was misleading). But, that is typical around here. Don't be surprised.
2. On the other hand.....you can be damn happy that we aren't going to run out of cash, because NP and MM have found a really clever way of getting "out of" the original note terms. As long as they were stuck with that note at a $10 conversion price, it was a bit of an albatross. When they added a second note and also agreed to immediately repay the second note at $7.5 million per month, we were all confused. Now we aren't confused. They had a methodology to pay the $7.5 million with stock at a value somewhat near market.
So, I think view #2 is the correct way to look at it. Careful readers of my work (there are few) will know that my mantra is "cash is king." I'm glad that they are finding a way to navigate the Fife waters.
p.s. As I read the S-3 details, I think they already did another tranche of this $7.5 million around November 10 with shares priced at 2.60. For some reason, they didn't have to register these shares (yet), so it wasn't disclosed on an s-3. I am basing this part of my comment on footnote 3, section ii, on page 6. I'm pretty confident in my thinking here, but not 100%.
When the book is written, this chapter will be called: When does $10 equal $2.6 or $3.4?
1. The negative view is that we are issuing stock at $3.40 while it is trading at $4.99 Call it dilution (the horror)! You could also call prior communication from management misleading (e.g. we are raising money at $10.....followed by repaying the loan (which already included a significant OID) with shares at $3.40). I think that is fair (that prior communication was misleading). But, that is typical around here. Don't be surprised.
2. On the other hand.....you can be damn happy that we aren't going to run out of cash, because NP and MM have found a really clever way of getting "out of" the original note terms. As long as they were stuck with that note at a $10 conversion price, it was a bit of an albatross. When they added a second note and also agreed to immediately repay the second note at $7.5 million per month, we were all confused. Now we aren't confused. They had a methodology to pay the $7.5 million with stock at a value somewhat near market.
So, I think view #2 is the correct way to look at it. Careful readers of my work (there are few) will know that my mantra is "cash is king." I'm glad that they are finding a way to navigate the Fife waters.
p.s. As I read the S-3 details, I think they already did another tranche of this $7.5 million around November 10 with shares priced at 2.60. For some reason, they didn't have to register these shares (yet), so it wasn't disclosed on an s-3. I am basing this part of my comment on footnote 3, section ii, on page 6. I'm pretty confident in my thinking here, but not 100%.
When the book is written, this chapter will be called: When does $10 equal $2.6 or $3.4?
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