Written by Art....
As in the past, this financing was done with with Transaction hedge funds. Meaning; Funds who typically try to get their cash back ASAP from the resale of the stock and hope to make their profit on the derivatives. That is why these type of financing's are almost always done at a discount. IMO, the 4.1 million shares from this offering was already flushed into the market with maybe some left-over for early this week. Don't think for a second that this is any reflection on the Fund's opinion of the Company. The business model for transactional funds require them to get their initial cash back ASAP to put in other deals. While it is likely our same two funds who have been in all the prior offerings were involved in this one, due to the size of this deal, I would not be surprised if a new fund or two took a small piece. KNDI has made a very healthy amount of money for the two legacy Funds and will likely do the same for them this time. But in each of the past offerings, the profits were made from the Warrants.
With the above said, I know many are disappointed, myself included, that Mr. Hu didn't do this financing with main line Wall Street "Sell-Side" Investment Banking firms (Firms with retail as well as Institutional Investors and Research Analysts) and instead opted to go again with the Transnational route. But, at least this funding has a "path" out the Merry-go-round the Company has been in since the first financing of mandatory Right of First Refusal to these funds. This one has a 30% "Right of Participation" on future fundings over the next year and no ties after that.
But in all fairness to Mr. Hu,, due to the very fluid nature of what is going on re. EV's in China, he has to be able to "react" to changing situations on a moments notice. IMO, whatever this funding is for, you can bet it is something that just arose. If he had to deal with "Sell-Side" funds, since this would be a "First" deal with them,it would take at least three months of DD on their part primarily due to this being a China Based Company. Mr. Hu likely felt he did not have the luxury to wait that long. Its either this, or if history holds true, some hic-cup in the China Banking system is going to materialize this week. All of his Past significant financing's curiously were followed within a week or two by unexpected turmoil in the China banking system. I prefer, this time, to believe the former, not the latter.
Now there have been a lot of theory's as to what this large quick financing is for, and I can make a case for almost all, but here is another "out of the box" possibility, (<10% Chance). Surprisingly, the 100% KNDI owned and made KD5011 "Frontal" (truck) was included on the Tex Exempt list. To those that don't remember, this is the orginal "Hangzhou 20,000 Long Lease" EV. It is not part of the JV and KNDI was able to make and sell it because it is certified as a "truck" not a passenger car. Trucks do not require the (for lack of a more accurate name) a Class A Manufacturers license. Having driven all of KNDI's Passenger EV's to date, the major difference between the two door 5011 and the KNDI/Geely two door is a separate rear compartment isolated form the passenger compartment. To anyone who has driven the 5011 and, like myself, is always scanning the "rear view mirror" the small window in the divider is irritating to say the least.
Anyway, while still Li Battery powered, and pretty much has the same top speed and range, I don't believe it currently fits under the Federal Subsidy program but it's manufacturing costs are quite a bit cheaper than the JV two door and to some seems to fit in with the current resurrection in demand for "Low Speed" EV's like Sfiang has supposidly sold some 100,000 plus in Shandong Province. So, IMO, while a real out-lyer, it would not totally surprise me if Mr. Hu has some plans to capitalize on its tax free status.
And another possibility:
I have not had time to read all of the recent posts closely, but I believe nothing has been mentioned about the 100,000 facility in Rugeo, Jiangsu province lately. Remember that facility has also been under construction for almost a year now and is also scheduled to be completed early next year. Perhaps we will soon see another $50 million expenditure to equip that facility. Since Jiangsu Province borders on Shanghai and Rugeo is only a two hour drive from Shanghai, hopefully the China trip group will take the time to make a side trip to see what the status is of this new facility.
But bottom line. I agree pretty much with Harris Goldman's view. Effectively, "Second Guess Mr. Hu at your own Financial Peril." A mantra that has done very well for us patient old-timers to date.
