Chalice Brands Ltd CHALF

Life or death: Chalice with Debt deadlines NOV 2022 analysis

[RebeccaG]

Chalice debt in 2022 spells a real problem especially the obvious is Chalice can't easily pay it off, either by raising capital, dilutions, more borrowing  since it cannot use its own cash flow which has been negative in many quarters now Ultimately, if this company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. We often do see indebted similar companies permanently diluting shareholders because lenders force them to raise capital at a distressed price.  November is 10 months away and debt matures with the only option of a hostile takeover and maybe even going private & that guarantees loss of 100% of your investment
This deficit is considerable relative to its market capitalization of US$21m, so it does suggest shareholders should keep an eye on Chalice Brands' use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. When analyzing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business that is currently running at – 23%  will decide if Chalice Brands can survive in 2022