Sysorex Inc (SYSX)

[BeamMeUpScotty]

FULL EXPLANATION OF CONVERSION CRITERIA By GREAT GATSBY

From yesterday's 10-Q:
Quote:

Under the conversion terms of the Debentures, the Debenture is convertible, in whole or in part, into shares of Common Stock at the option of the Holder at any time until the Debenture is no longer outstanding. The Holder executes a conversion by delivering to the Company a Notice of Conversion specifying the principal amount to be converted and the date on which the conversion is to be executed. The Conversion Price is set at the lower of (i) $18.00 and (ii) 80% of the average of the VWAP during the 5 Trading Day period immediately prior to the applicable Conversion Date. The number of Conversion Shares to be issued is determined by dividing the outstanding principal amount of the debenture to be converted by the Conversion Price.


That means that the higher the share price, the fewer the number of additional shares that need to be added to the O/S for the purpose of conversion, up until the VWAP exceeds $22.50 per share, because at that point $18.00 per share would be the lesser of the two conversion price options (18/4*5=22.5, 18 is 80% of 22.5).

The deal would significantly increase the book value of Sysorex. From the May 5th business update:
Quote:

If our common stock was to remain at these levels following the Ostendo transaction, we would be trading at far less than one-half of book value....


This would necessarily increase the share price based on sheer mathematics, let alone any additional price appreciation from more buying pressure, or the factoring in of a valuation multiple. Stocks don't trade on just the basis of their book value alone, after all. As a consequence, the rolling 5-day VWAP continues to increase, so converting continuously at 80% of that nets you fewer and fewer shares overall, and the dilutionary effects of these conversions is mitigated.

This assumes an A/S raise, which takes about 90 days to complete. From the May 5th business update:
Quote:

Whereas the Company has almost no available shares at this time and counsel has advised that the process of increasing the authorized shares can take approximately 90 days, the debentures should not have a material impact on the Company´s share price during the next several months.


So there is a long lag time between the deal closing and raising the PPS and when these conversions can actually take place. If they started that process right now today, it would be late August by the time any conversions could begin to occur. I very much doubt management will be sitting around doing nothing until then, so the question becomes how high do you think the share price can rise in that timeframe? The effects of this convertible debt may be marginal at worst and utterly immaterial at best. It's based on this analysis that I've come to the conclusion that this was management's plan all along, why the deal is occurring to begin with.


EXTRACT FROM PRESS RELEASE 05 MAY.

THE SHARE PRICE IS MOVING TO FAIR VALUE AND HAS A LONG WAY TO GO!

https://www.otcmarkets.com/stock/SYSX/news/Sysorex-Provides-Business-Update?id=355749


“If our common stock was to remain at these levels following the Ostendo transaction, we would be trading at far less than one-half of book value, which is likely one of the reasons that funds like Bigger Capital and District 2 have identified Sysorex as a deep value opportunity.”

Mr. Wasserberg continued, “From a business operational standpoint, Sysorex´s footing remains strong as the Company´s Sysorex Government Services division continues to execute and has seen revenue growth the last several months, which has positively impacted our bottom line.

We have historically been able to supplement our balance sheet by mining more than $800,000 a month of Ethereum (ETH) on average.”


See for yourselves!


https://www.otcmarkets.com/stock/SYSX/news/Sysorex-Provides-Business-Update?id=355749