Monday, June 08, 2020 8:41:19 AM
Some think this is too much. I don't. I would love for all the warrants to be exercised.
But the new question becomes: What will they use this money for?
No doubt some will be used for building out the new facility, and even some earmarked for marketing. But the current facility in Quang Nam should be relatively inexpensive to operate.
As most of us have read, the sericulture industry in Southeast Asia is being hit hard right now due to the pandemic. Mulberry farmers are even burning their crops because they don't have access to silkworm eggs.
Also, there has been a lot of capital invested into sericulture manufacturing the past couple years. Vietnams new focus on reviving the sericulture industry has resulted in the building of sericulture manufacturing plants that can process thousands of tons of silkworm cocoons at full capacity.
So what do these new facilities do when they can't process the amounts of silk needed to cover costs? Unfortunately some of these silk manufactures could go belly-up.
So what's stoping Kraig Labs from using part of that $24 million (potentially) from purchasing one of these fully operational sericulture plants and retaining all of it's old staff? Kim could give the previous owners executive roles while also getting a nice payout without having to file for bankruptcy. It's a win-win.
A sericulture facility was just built in China for a little over $11 million. This facility can process about 4000 tons of cocoons a year. I'm willing to bet that same size facility would cost about half that price in Vietnam considering the average income in Vietnam is about 1/3 of that of chinas.
More and more I'm thinking this is why Kim is doing this financing deal now and for that amount. It would give us essentially instant large scale production and it would turn our competition (for mulberry) into stakeholders. This would be the only way to satisfy near and medium term demand for our spider silk. And it would fall within the $50 million phase 2 investment approval from the Vietnamese government
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