RE:RE:RE:RE:Are they going to run out of money before it is all built?So here are 5 reasons why we can safely expect no bought deals before the spin out:
1. Raising money at this time, while the spin-out preparations are in progress, will completely derail the process and would make no sense. Even just the act of issuing a new prospectus - where is the logic in that, when the company as we know it will cease to exist in a few months? They've got plenty of other things to issue and work on at this time, all in relation to the spin-out. At a minimum, a BD would halt everything for a full month while it is closing. For this reason alone it's a non-starter. And this isn't something that I made up; rather it was communicated directly to us by certain members of management.
2. The first BD since going public occurred in April 2018, and they've completed the last one as recently as October 2018. Raised $24m, of which $11m were reserved for working capital and general corporate purposes. This is more than enough when you consider the monthly burn rate is $0.5m, and the other major capital expense is just the $1.5m investment into the modular grow in Canada. The California campus is already funded and Sunniva is off the hook for making the payments on it until it is operational.
3. Sunniva has already proven itself willing and able to keep dilution to a minimum. As a "show me" demonstration that this is a fact, consider that after one year of being public, the company still has the lowest share count in the industry by a large margin. I know that other cannabis companies like to have their balances padded by hundreds of millions in cash and perhaps this is the expectation from a company in this space, but Sunniva has been doing it differently and can be reasonably expected to maintain their shareholder-friendly approach to funding.
4. If they had an urgent need for cash, they wouldn't have stockpiled product (extracted goods manufactured by their Sun-Oil facility) for a concentrated Q1 launch. The fact that they can produce 200,000+ units per product line before going to the market with it, tells you everything you need to know.
5. I think the very idea that there is a chance that Sunniva is "going to run out of money before it is all built" is based on simple ignorance and misperception, beyond what. Here are 3 of the things that are possibly confusing to lazy, uninformed investors:
a) Sunniva isn't actually paying for the California campus before it is operational - it costs them nothing. As a side note, they're also not in charge of building it and aren't responsible for the delays, which are normal and understandable for a facility of this quality and scale. On the other hand Canada, for now, is only going to cost them $1.5m to build (on the land they already own) and they do have this money.
b) The latest quarter, ended September 30, had their cash balance at $3.1m. Easy to look at this and assume they'll run out of money... except they've since raised $24m, as mentioned before. This is exactly the kind of incomplete "DD" that leads clueless people to believe they're entitled to an opinion.
c) Again, the cash padding thing. Weed investors expect inflated balance sheets to be normal and desirable, but it really isn't when it kills the company's future earnings potential and blows its market cap out of proportion to the SP. Sunniva is different. It doesn't do things that way and that's one of the reasons it's going to be so desirable to institutional investors, even if today's retail investors don't see it like that.