Sphere 3D Corp. (ANY)

[Hugodrax]

TREDD,

It's not very complicated. Cyrus is a major creditor that had a seat on the board. When things are going along fine (i.e. solvency) there is no conflict.

When things go off the rails a conflict is created because lenders move in to realize on their collateral etc. which usually wipes out equity holders. There's no reason for him to be on the board and he'd probably have to recuse himself from any decisions in dealing with lenders anyway.

As a director he also has personal liability to think about so the sooner he gets off before Cyrus pulls the plug the better for him, personally. Being on the board of a company that goes through a bankruptcy is not fun and it follows you around.

Usually the simplest explanations are the right ones. Just read the letter from Cyrus - it's classic "we are about to pull the plug and call our debt" language.

The ONLY thing shareholders have going for them, in my opinion, is that Cyrus it self might be screwed. They are sitting behind Opus Bank's $18-$20M in debt that has a first claim on the receivables, inventory and other assets that can be liquidated. In a liquidation even Opus takes a haircut in my opinion. So Cyrus needs to do SOMETHING to get Opus bank out whole and allow them to jump to the top of the heap - IMHO that can only be a potential sale of Overland+Tandberg+Rdx. If they could get something like 0.3X revenue for that business (Quantum trades for 0.6x and has gross margins almost 2X higher with much better product) they might get enough to get Opus out. Hopefully that buyer would take the employees and severance liabilities that would go with it (Nobody will take EK's severance on IMHO). That would leave Opus with V3 + "glassware" which aren't worth much IMHO but the burn would be way down - they could then do a massive debt to equity conversion like their letter says ($27M at say 27 cents would be 100 million new shares). That would leave about 150M shares outstanding owning effectively.

That would be the upside case for shareholders IMHO - to be left with MASSSIVE dilution and no real business prospects but SOMETHING that could bumble on for a bit.

But to be honest I think investors are looking at a total wipeout and Cyrus will be very lucky to get half of their debt back.


All IMHO and speculation only.