BLACKROCK Municipal Income TRUST V.BFK.P

RE:RE:RE:RE:RE:RE:R/S is "Proposed"

[Jefe127]

quinlash wrote: Hi S7,

The topic of dilution has been a big one for all the Cannabis Producers over the last year (or longer).  The issuing of shares to raise operating cash has been done by many and each time the market tends to respond negatively. The issuing of shares for the merger or acquistion of another company tends to have a positive response where the market sees the merger or acquistion as something that will lead to the future success of the company going forward.  Each time a company issues shares, the sharecount is seen as being "diluted" and gets priced in by the market over time after such news is released.

With the R/S (again, assuming the ratio of 8) HEXO sharecount becomes "un-diluted" (for the sake of a better term).  Current sharecount on HEXO would go from 480 million down to 60 Million making each share worth more, hense the expectation of the company is likely that the price per share will remain somewhere in the range of the sharepirce x 8 once the R/S is excuted after Dec 16th.  

Between now and Dec 16th the stock will continue to trade and the shareprice (as always) can be expected to change minute over minute, hour over hours, day over day etc until we get to Dec 16th at which point the vote will be cast and the decision will be made on the R/S.

From now until the 16th the shareprice will either fluxuate based on typical trading or may be moved by news coming out on the company itself or by news coming out that affects the markets in general. 

The next notable (and known) event that can be expected to change the markets will be the U.S. Election coming up next week.  Dems and Reps each hold different positions on Cannabis Legalization in the US and a win by one party or the other can be expected to change the markets views on the Sector.  I am not going to make a call on the outcome of the election as we all know that is foolish and makes for bad dinner conversation ;)

Again (like yourself) I hold longer term and prefer not to do much with short term trades with my planned retirement in 2021.  Investors looking to hold long enough for US legalization may be holding longer term than that but we will likely get a better understanding of how long that may be once the election is behind us and we hear something from the New or Re-elected governing party.

I would agree whole heartedly that the greatly reduced sharecount lines the company up for issuing more shares and again bringing the sharecount back up over 60 million however the question that each investor needs to ask themselves is "Why would they?".   They are sitting on a great deal of cash at the moment and that cash may (or may not) be enough to sustain their operations until they become cash flow positive.  If the company were to issue enough shares to substantially dilute the sharecount again what would they need the cash for?  Would it be to sustain operations or would it be to faciliate the acquistion of another company for a product line that has been talked about but not released yet ?   If they were to raise capitial (for whatever reason) the current shareprice is no guarentee as to what price the capital would be raised at as we have seen Cannacord provide financing to HEXO for apx 18% over the market price per share in previous months.

So, in summary, dilution is not what we are looking at with the news on-hand, it's the opposite of dilution with the sharecount going down, not up.  We will have to wait and see if the company does, or does not, issue more shares and for what purpose.

All the best

Q

Spectra7 wrote:
Hi " Q"...as always your thoughts are compelling and reasonable. I agree, on the immediate surface the R /S is simply a mathematical equation. In my experience companies do this many times to set up the next equity offering, with Hexo it provides the vehicle to maintain their US listing, ( hugely important) and at the same time roll back the #'s to spark new investment. I always equate dilution to reducing my original investment value...( haircut). EBIDTA positive in the next Q or two is the only reason why I continue to hold Hexo. Obviously my timeline is not exactly the same as yours...to be clear, I'm not a daily trader in Hexo but have been involved and actively traded this issue from its 1st day of listing. Cheers S7

Thanks for your articulation on this Q!