I asked him what will happen to existing common shareholders if that information from Bloomberg turns out to be true. He responded:
"I think the current common shareholders will end up with very little in the end.
The point of my article published back in October, 2017 was to consider buying Concordia's senior secured bonds (which were then trading in the $0.78 to $0.80 on the dollar and have actually gone up in value since writing this article), and not buy the common shares.
When I wrote my article on October 24, 2017, I wrote:
" D. Current Common Shareholders: While technically the value of the common shares are virtually worthless at the moment, I'm assuming that the current common shareholder will end up being given between 1% and 5% of the post-restructuring equity. I assume that the common shareholders will be "thrown a bone" because this entire Restructuring Application is being done consensually and both the Court and the Director under the CBCA will want to see that the entire restructuring is "fair." Given that I am estimating that the post-restructuring valuation of the equity is in the $600 Million to $900 Million range, current common shareholders will likely own approximately $6 million to $45 million in post-restructuring equity. In other words, based upon current share price, shareholders could end up doing materially worse or slightly better than their current share price."
Assuming the recent Bloomberg report which I posted yesterday turns out to be accurate, the common shares will almost certainly be worth a lot less than today's trading price. You should of course do your own due diligence, but I wouldn't be buying common shares in Concordia at today's share price.
Based upon the information quoted by Bloomberg in the article I quoted on Feb 2, 2018, the creditors/ investors who participate in the rights offering ie. putting up "fresh money", will likely get 90% of the post-transactional equity. So, who will end up with the remaining 10%?
It is likely that most of the remaining 10% of the post-transactional equity will be given to the unsecured bond-holders who are being asked to take an enormous (80% plus) haircut on their debt. These unsecured bond holders rank higher than common shareholders in the capital structure of the company.
So what would be left for the existing common shareholders after the new highly dilutive rights offering/ financing comes in?? Not much!
I originally assumed current common shareholders would end up with 1% to 5% of the post-restructuring equity. I now think it will be 1% or less. In other words current common shares are probably worth $0.20 or less based upon current assumptions. There are currently about 51.2 million common shares outstanding.
I also expect that there will also be a consolidation of Concordia common shares in the final deal as part of the restructuring which could end up being a 20:1 or 50:1 consolidation (my guess).
Conclusion: Common shares in Concordia at current share price are a very high risk investment with a high probability of losing a substantial percentage of its current $0.65 share price (even following yesterday's 8.7% price drop) in what appears to be the deal being contemplated. AVOID!
I would be interested in anyone else's thoughts on the subject."
My question though is, if it's true and the SP declines to 0.20 post-restructuring, it could very well go back up to double-digits if the DELIVER strategy is a success, right??