RE:RE:RE:RE:RE:Be Careful Here No, you do not understand how convertible debentures have been historically used in the cannabis industry. There is technically three ways convertible debentures would go:
1) Conversion into shares assuming share price > conversion price ($1.31) - There's incentive to convert into the discounted shares.
2) Conversion Price > Share Price - There's no incetive to convert into shares and cash is demanded back. If no cash, this is a default event pending #3
3) Conversion price is re-negotiated which was alluded to in the summer by management. This has been common as the creditors who own the debenture do not want to see a default. The price of conversion is re-negotiated to the current market price.
11 million / 0.50 Share price = 22 million common stock convertible plus the warrant conversions at reduced pricing.
On the biggest bull run in recent memory they have been unable to sustain any price movement nor have they been able to gain any traction. This company has serious liquidty risks and by every performance measure is over leveraged.
You can tell a company is over leveraged when debt > equity. This spread will only continue as we take on more lease liabiltiies.
As of Q3:
Total Debt = 43 million
Total Equity = 34 million
https://www.investopedia.com/terms/l/leverage.asp
tcastle wrote: You're painting the completely wrong picture here. If these debentures do in fact lead to a dilution, the price of this stock will have to be over $1.21, which translates into a market value of ~$123m. The dilution would be only 9.75 million shares ($11.8m in debs = 11,800 debenture units * 826 warrants each = 9.75m shares). This is less than 10% dilution (102m shares outstanding now), and this is only if the share price rises over $1.21. If it doesn't, then D9 refinances the debt with existing credit facilities or a new term loan, and the debentures are gone and we carry on.
Also, an additional chunk in debt for a growing company is of no concern to me. As long as the return on cash is higher than the interest, it is a good use of funds. Judging by their revenue per sq ft metrics (one of the best in Canada for weed retailers), I don't see this being a problem.
Curious how you arrived at 20+ mill stock and 10m warrants. Maybe I'm missing something..?