RE:RE:Bought dealIn simple terms....
In a bought deal the company gets the money no matter what, as the underwriters have "bought" the shares and then it is up to them to re-sell them to investors (in other words, go get the stock off their books). The underwriter takes the risk that they will not be able to re-sell this stock at the Issue Price.
In a private placement, there is always the risk that there is insufficient investor interest and thus the private placement is not fully subscribed. So in that scenario the company is taking the financing risk, whereas in a bought deal the underwriters take the financing risk.
jermoguy wrote: Hi, thanks for sending this. So in layman's terms, a bunch of underwriters bought a block of shares (12.5 mil) for a discount @ $1.20 a share, with the option to buy more later. As a result, GDNP gets a $15 million cash infusion. And then they also paid down debt with BDC, which if memory serves me right, financed them a couple of years ago? I am sure I have some of this wrong.
I guess the good news is, if these underwriters are buying shares at $1.20, we probably won't be seeing 85 cents again anytime soon.
Can someone explain the pros and cons of a bought deal over a private placement?
I like the paying down debt part.