Stop thinking like an investor and more like a business owner: leverage. Yes, like OTC Buyer said there are tangible risks from uneducated or manipulative individuals getting in the way. And its not that “having your name on things” is inherently bad, rather, it’s the financial risk (or opportunity) of doing so. If you were running the show here, how would you leverage precious capital to sustainably grow cash flows WITHOUT crushing common shareholders through “bottomless pit” toxic funding?
What $AXXA seems to be doing is diffusing the risk through diversification of their financing and then structuring the deals with flexibility to gain more equity over time (upside) and protect invested capital from under or non performance (downside). As payments are made (much like a mortgage), equity allows the company to refinance or restructure agreements to cut financing costs and leverage that capital elsewhere.
While not all the deals are structured the same way, look at the VIP Digital Communities PR from back in March which explains how Exxe gained an $8 million asset for $1 million invested.
“A controlling interest value of approximately 8 Million USD of assets was secured by Exxe’s contractual commitments that included a number of notes with different maturity dates and installments payable over 24 months. The contractual agreement also provides protection of Exxe’s investment to be backed by the assets of the target company, with interest on the invested capital at 10%, this secures protection of the 1 million initial investment by Exxe Group. This structure protects Exxe’s principal investment if Exxe chooses to exit.”
Or look at something more recent, like the agribusinesses:
“DIONI was acquired through a combination of private equity funding, assumption of debt, and privately structured capital investments. Exxe Group acquired controlling interest representing a total of approximately $9 million in company-wide assets and approximately $3 million in 2018 revenue, which was secured by Exxe’s contractual commitments over a three-year period. Exxe plans to provide growth capital as well as a payout to the original owners.”
Starting to make sense? This deal has the flexibility to pay for itself in 3 years. And likely much sooner when combined with growth capital and the synergies of the other three agribusinesses that form a complete end-to-end supply chain. The company benefits from assets gained & immediate cashflow, the original owner benefits from gaining on the growth of Exxe, and we as common shareholders don’t have the risk of wondering how some greedy-ass toxic lender is going to get his shares as cheap as possible.
The Reg A offering is just another way to mitigate risk by providing a potential “cushion,” or accelerating the development & equity in the assets. It’s not all going to be issued at once and may not all be needed. Even if all 100 million shares were issued to long term investors, it would be 20% dilution issued at 100% of the current price. That’s 80% total upside from this level.
All of this is IMO, of course, but in the typical OTC environment of “dilute to hell, rinse & repeat,” I like my odds here.
