RE:RE:RE:+ - 50 centsSarbbatth wrote: Hawk
I have already mentioned on this board that I will be a buyer once all the DEBT is cleared, even if the price is north of $1.
Do you understand that a growing company with a capital-intensive product is cash flow negative? If they get a new $100M contract that they must deliver in one year, and they get $30M of that prepaid, and if they have a gross margin around $20M, that means that $80M - $30M = $50M has to be financed prior to the customer paying for it. Those are simplified numbers, but that is the general idea.
How would you like the company to finance this? You want them to dilute out all of the shareholders by doing 100% financings as capital raises? Do you understand that the market will punish a company that dilutes shareholders by keeping the stock at the low end of its range, so not only will you have dilution, but the dilution will be exaggerated by the valuation being low. And a private placement will have additional dilution in the form of warrants.
If you were a manager in EIL.V and you actually believed that the company would have a $300M valuation in five years, wouldn't financing the cash flows needed to get to that level by dilution be the stupidest possible way to finance?
Debt is healthy in this case because it finances the growth, and the EBITDA that is realized from that growth is at a healthy level relative to the debt levels.