Well… it’s obvious today’s news does represent more dilution is coming our way. That’s a given.
How you may choose to interpret this event is not.
You could… think, OMG, now there are another 43.5 million shares we’ll all eventually dilute our holdings again, and just be angry about it for awhile. And for those who cannot average down or participate… I understand being angry.
A perspective I’d like you to consider is the following…
The company has determined it to be absolutely necessary to increase the amount of available shares in order to realize their short and long-term objectives. If they succeed (which obviously we all hope for), then the outcome will be positive for all longs, regardless of whether they are able to participate in this current Series B offering or not.
And for those who can do something about it, you can:
1. Average down. Again.
or
2. Get in on today’s offering and DOUBLE your average down - with the warrants. You can get in on similar terms that the previous Series A investors were able to get in at.
Regarding today’s offering, there are a couple of points you may want to consider.
There is a vote coming to authorize raising the ceiling. That’s a done deal, right? That vote will come… likely very soon.
Will the company win that vote? Yes.
They’ve designed these offerings to ensure this.
Now why would the company want to make sure they can increase the ceiling? Well, because the other options are not in the company or the SHAREHOLDERs’ best interests… otherwise it’s a reverse split or BK - and NO long would benefit from either of those outcomes.
Hopefully, you can see that they had to make sure they had a favorable outcome to the vote.
So…
They will vote to raise the ceiling.
They will get that vote, because they MUST increase the ceiling.
Now… none of those shares from these recently announced dilutions, and the coming dilution, will put any common shares into the hands of any hostile actors who would sell them as soon as they could. Under the terms of these offerings, no one can sell any of these shares until AFTER the vote (at the earliest). And even then, these are longs we are talking about here. These are not shareholders that got into this stock to sell at a buck. These are the type of investors who will take their investment money out at some higher set price - be it $2, $5 or maybe $10 a share. None of them will be selling at .50 or .75¢.
Additionally, the only shares available for trade for some time
- even after the vote to authorize the ceiling is complete -
are those shares from the original 450 million shelf.
These additional shares are not going to be in the float for AT LEAST a month or two. Remember, they have to increase the shelf after the vote.
In that environment, shorts will be hard pressed to find any available shares. Should there be news that sends the share price upwards, how well would shorts fare in that scenario?
Not so well, IMO.
Again, I understand that news like this is difficult to take, after having just heard about all the additional massive amounts of dilution.
However, this also is putting FUTURE shares into the hands of longs who will not sell on the first chance they get. And that is in All long’s best interests.
It also represents an “egalitarian approach” by offering a similar deal to those less well-heeled investors similar to what the last set of investors received, and what Cognate will be receiving in their debt-for-share swap.
