RE:RE:warrants?Ok I like when theories or hypothesis are presented to be either justified and proved or disproved...very scientific...so thanks for that CT.
My contenious side always like to challenge or question...or TEST the theory.
So im testing wether or not a PP is actually required.
The Vertex site details IMP loan amounts near $19m.
The IMP site details outstanding payments totalling near $14m.
So does that say that of the 19m, 5m has been paid and 14 is left?
Lets assume contract delivery starts may 1st...so downpayment should occur before say mid April.
I listened to the last conference call and the question was asked and answered 'how ready are you"...the answer was something like "...we are ready to start right now..." ... just waiting on the contract to be signed. That tells me they are 'staffed up' with all the right resources.
So now I ask...What are the starup costs, and how much of that $12m downpayment is required to begin delivery...and given the state of readiness...it cant be much...put planes in the air perhaps...but seems far less than $12m US.
What if its $3m to startup on May 1st? That leaves $11m of $14m for debt.
If you add in a few pennies from the warrants...the debt could be near complete in May.
Now if recall correctly, IMP will recieve about $3m per month REVENUE from the first SDI.
So in my hypothetical scenario...June1st IMP gets that initial $3m startup back in the first milestone...to be used to fund continued near startup operations...and so on...
And corrct me if Im wrong, but the royalty is applied to NET profit...net profit in the first 2 months would be slim...so really no royalty...and by then in CT's scenario the royalty would be negotiated down to something far less...
Then add the theroretical second SDI...add 2 months for financing and startup etc...so by aug sep IMP has revenue from:
- the first SDI at near $3m/month
- the second sdi (??)
- potential add-on revenue from the first sdi (as mentioned in the press release)
So is the .37c (todays resistance) there for accumulation or for other reasons.
Thats the retailers risk/reward point...as i see it.
ctblizzard wrote: About 2/3 of them are Vertex warrants at 7 cents but (someone correct me if I am wrong) it would take change in capital structure for Vertex who already owns 19.9% to exercise them? (apparently that is the max percentage of the company they can own0
The rest I believe are insider options at different prices but the bulk over 35=40 cents, those could come out at any time the stock ticks up a bit. They are listed in the 3rd quarter financial notes.
The plus side to the warrants/options is that obviously some cash comes in with exercise.
There are numerous big things that have to happen. The company had been in survival mode and had developed a pretty terrible capital and financing structure which was that way due to the high risk at the time. Now, if this is de-risked with the major contract, they are probably working on a re-structuring of debt, warrants etc to happen sometime after the first payment comes in.
It would be to Vertex's benefit and obviously to the company's benefit to fix this situation as soon as possible. Instead of sucking out the earnings power of the company, Vertex will probably get some debt payback, some new stock as part of a private placement that allows it to own more shares but stay within their percentage and then have reduced interest and royalty rates. I do not expect the royalty to totally go away but that is possible.
While there will be dilution to current stockholders the benefits of having a cleaner structure of debt, interest rates and lower or eliminated royalty will make up for it allowing the company to move forward and giving a much clearer path to siginificant earnings.
I think this will all happen within 2 months. Until then I do not think this makes a big move up (or down really) but the risk would be to do the downside with a market meltdown causing some of the heavily invested to lighten up.
Originally I thought the clearest path would be a buyout by another company in the industry but after talking to a few people I do not think this can happen at least not yet. There just is not enough visibility and reliability in revenues when you have huge lead times with somewhat unknown companies operating with new technology on a new basis in a foreign country and of course numerous legal issues with enforcement of such.
Everyone here asks when the buying is going to come in. My opinion is that it already has come in (for now). People bought a while ago, bought when the execution happened, added when it dropped and added again, and of course Gomes bought at least a million (or so he says). I feel short term, the immediate buying is already in the stock.
So to explain what I am talking about above. Perhaps there will be 160 million shares outstanding, a 3-5% royalty and debts with 10% interest rates or less and less debt overall as well as less warrants and options. That would not be a bad situation but one that would put the company on a sound footing to move forward.
So the steps i see are
1- collecting the down payment
2- capital and debt, warranty, royalty re-structure combined with a private placement
I think the potential dilution is already mostly reflected in the stock because most people know they cannot operate with a 17.5% royalty and interest rates as high as 25%
Obviously if you look back to the fall when the stock hit levels double current levels one has to wonder what the difference is. No more stock came out, no new big debts and now people have an executed contract with a party that is known.
So the only real difference is 1- people would have expected a payment on the execution and 2- some people might be wary of who the contract is with.
Those are the only things I can think of as to why the stock did not hit former highs. But the elements are in place to get there in a few months (I hope).
Just my opinion. I am long this stock on the US ticker. 1/3 purchased at 32 cents and change and 2/3 purchased at 22.4.
I would only consider adding at or below my lowest purchase.
I wish everyone the best here. It would be nice to see a story play out the way it should for once on these exchanges.