BigAl61877:
Regarding your comment that the company is on a death spiral with Cornell:
Although this financing with Cornell is clearly dilutive, I do not believe it is correct to call it death spiral financing.
Death spiral generally refers to the type of equity based financing that has no limit on the shares that can go out the door. Typically, death spiral refers to the "bottomless convertable" debentures, where the number of shares the financer gets is a function of the share price. Therefore, the lender gets more shares for the same number of dollars loaned as the share price goes down. Therefore, the lender can short (or just plain sell the shares they already own) right before each cash transfer occurs, giving them more shares. They then sell those shares (and probably short shares as well) before the next cash transfer, thus driving the price down yet further, resulting in them getting even more shares per dollar loaned for the next cash transfer. This "death spiral" keeps repeating, with the lender getting more and more shares per dollar loaned with each successive cash transfer.
I don't see anything in Friday's 8-K indicating that this is the case. It appears to me that Cornell can get a maximum defined number of shares and warrants, and I don't see where they have any advantage in a low share price. In fact, it appears to me that they profit more if the share price increases. This is a big difference from death spiral financing. (Again, the fact that something is dilutive does not mean it is death spiral).
Ironically, SaVi's prior financing deal (with Golden Gate) is much more along the lines of death spiral financing, (as they do get more shares as the share price falls) yet I rarely see anyone complaining about the deal with them.
AI
