RE:RE:RE:RE:RE:Negative equityLuckierjack wrote: the recent quarterly results were just posted on Friday. The debts now stand at $7.2 million. Add in the equity portion of the convertible debt for another $0.9 million and they are up to $8.1 million in debts against assets of $1.1 million. How do they get past this? LJ
I know you state you are a lowly accountant so you are used to balancing books, etc. But I don't understand the point you're trying to make. It's a small cap stock, they acquire debt in order to grow. $7.2 million is not that much considering they can get a battery customer that will bring revenue of multi-millions.
I THINK you are trying to say with the debt they are accruing how can they survive as a company with the current cash burn. I THINK. However the big risk is not raising the equity they need to capture future growth. I don't care so much on which debt instrument they use as much as how they apply that capital to get the most shareholder value. Is it a good thing to increase debt, no - I agree with you on that. You want a company with 0 debt, clean balance sheet, high cash flow and strong margins and GLK has none of that. Good thing is by avoiding dilution it can create a torque up on good news PLUS interest rates are still relatively low making it an ideal time for any debt accumulation.
So I am not sure what you mean by how they get past this, are they the only company in debt on the TSXV? Actually I will answer that for you..
Mason graphite
Eagle graphite
Syrah was looking to secure a 50 million US Debt facility but settled for a PP. Check out their market cap. Cost of debt is always higher than the cost of equity which is why they wanted to go in that direction. Interest on taxes can also be tax-deductible. But dilution hurts shareholder value.
There are more but it proves the point.
So did GLK make mistakes that they need debt to pull themselves. Yes. However using debt as the only metric to determine the health of the company is investing in a vacuum considering there are many 0 debt companies that are going nowhere. You keep repeating the same narrative hoping to get a response I am not sure of. "How do they get past this?" Do you want someone to say they won't and are heading for doom. Sell!! Sell!!! Sell!!!