Post by
todumbtothink on Feb 17, 2021 8:25pm
Comment on financing
Good news because they had no choice. They were up against a wall. Now, let’s do some math.
Before the financing there are 175,950,573 basic shares outstanding + 13,489,956 options which gives 189,440,529 shares outstanding on a fully diluted basis.
Let’s say they want 10 million $ as they will need to repay their debt and fix the working capital. After these priorities, whatever is left can go to growth. It’s a marketed deal and remember institutions typically will not invest to fund working capital which is no-growth proposition. This means, they surely will be tight.
So, lets assume D-BOX can convince the market to buy the warrants at 15 cents roughly at todays close with a 30% premium on the warrant for two years which would be a good deal.
Personal Note : I doubt they can get a higher premium, unless you believe what is on page 6 of the prospectus “D-BOX management estimates that annual sales of D-BOX haptic products in the home entertainment market could reach up to $120 million for the fiscal year ending March 31, 2026”
Back to our math:
So, stock issued at 15 cents
Price of warrants 15 cents + 30% = 19.5 cents rounded at 20 cents.
To get 10 million $:
30 million shares x 15 cents upfront = 4.5 million $
30 million shares x 20 cents for the warrants = 6 million $ within two years
D-BOX gets 10.5 million $ before fees issuing 60 million shares
So, D-BOX needs to issue 30 million units considering one warrant per share, that is 60 million shares over two years. To calculate dilution, calculate 60 M shares on 189.4 O/S FD shares pre-issuance for a 31.7% dilution. Ouch! Again, they have no choice, may as well bite the bullet.
Now, let’s say they want (they probably need) 10 million $ extra for growth or 20 million $ in all. You then need to issue 60 million units or 120 million shares for a dilution of about 64%. Which is over 50% and equates to losing control. Then, the key for management becomes to place the deal as spread out as they can (in retail hands). This way they can avoid having a major institution that could impact the vote and eventually kick management and the Board out if the fail to deliver.
The pricing of the deal will be very interesting, and it will surely be priced to be placed. Then what we need to watch out for are the future filings to see if any institutions stepped up to the plate, bought the deal and held. If none did, the stock will remain on a roller coaster. In the short term, the Institutions will buy, if retail supports they will short the stock in their face and ride the warrant. Good old arbitrage.
On a final note, the syndicate appears to be well chosen and has an interesting retail exposure especially with Canaccord and Industrial Alliance. This is sound strategy. If Steve Li drove it, good for him and good job. Also expect research reports to shortly follow to support the stock and considering D-BOX may come back to market relatively fast. Especially if they go for a smaller raise this time around.
Comment by
ThunderLips1 on Feb 17, 2021 8:42pm
Good info. Thanks for taking the time
Comment by
renoman1960 on Feb 17, 2021 9:49pm
As of Jan 31 only 50,404 shares shorted
Comment by
silentreader on Feb 18, 2021 9:54am
Looks like it'll end up at 43,7% dilution if the 15% over-allotment is exercised. Painful for a company that was suppose to be soooo undervalued...
Comment by
muslix1 on Feb 18, 2021 10:00am
in a month split 10 shares for 1... let see
Comment by
MrMugsy on Feb 18, 2021 2:32pm
That's right ... at some point this company will need to do a reverse split ... if there is growth planned for their future. I'm still looking for my re-entry point ... If I get back into this one. Watching ....
Comment by
kalareta on Feb 18, 2021 5:47pm
I will sell it to you at 0.99 c per share.
Comment by
jfddev on Feb 19, 2021 7:52am
Someone have reference to this "split reverse" 10 for 1 ? Where this come from?