RE:Enters into $25 Million Convertible Loan Facility TSXV:THNKFairly expensive financing for a convertible but the strike is well out-of-the-money. They are calling it growth capital (is another acquisition forthcoming?). If converted it's another potential 17.3mm shares to add to the current ~60mm so any acquisitions need to be massively accretive for a deal to make sense for existing shareholders. I suspect the company has worked with Oak Hill on finance strategies for acquisitions (hence the convertible), though it was OMS that acted as financial avisor, given that the current share price makes equity financing all but impossible without massive dilution. With global markets trading where they are and risk capital heading for the exits management has likely identified an attractive target.
The big questions of course is regarding the 2022 organic outlook and beyond. The company initially indicated that it would be cash flow positive this year and no new financing would be required. Given that the convertible can also be used to fund working capital and other business needs, although that doesn't appear to be the use for $15mm of it, the outlook still has to be called into question. THNK has pulled $10mm immediately from the loan meaning a use for the funds has been identified and yes it could be used to finance a cash flow shortfall relative to initial expectations. The remaining $15mm will only be pulled to fund "the acquisition of complementary businesses or assets" so acquisitions only. CFO departure and removal of the investor presentation from the website continues to create concern for investors as does the fact that it's April 25th and no earnings release/call has been scheduled. Overall the company has done a poor job communicating with existing investors. Having said all this the shares appear to be incredibly cheap at current levels though a return to $4.00+ may be quite some time away without a significant new organic business win.