Learning_curve, my last post for awhile and some food for thought. You wrote, "Frost does like to buy those shares on the open market."
I will present to you a scenario in which Mr. Frost can gain control of MP without buying a single share on the open market. Muscle Pharm is an insolvent company if it wasn't receiving external cash infusion. In the past, this cash infusion has been through the dilution of common shares. My impression is that those providing goods and services to MP now refuse to be paid in continuously falling MP shares and the company is unable to secure a market rate, traditional loan, thus forcing it to seek a 20% interest rate loan.
When a company becomes insolvent, those with claims to its assets are, (don't remember the exact order):
1. Payroll.
2. Secured creditor. (pretty much sure Mr. Frost belongs here if the loan proceeds).
3. Bondholders.
3. Unsecured lenders.
4. Common stock holders (us, we're in last place, baby!).
I can see a few scenarios unfolding with this bridge loan:
1. MP management pulls through and stock takes off. In which case, I'll rent an upscale hotel room for week and celebrate with cocaine and hookers (just kidding, maybe not a week. lol.).
2. MP is unable to fulfill its loan obligations and is unable to secure other sources of funding, allowing Mr. Frost to make claims to the company as a secured creditor.
3. MP is bought out by a larger company, which fulfills the loan obligation to Mr. Frost.
I'm sure there are other possible scenarios. According to Forbes, Mr. Frost is worth $2.4 billion. A person in his position has expectations and standards. I'm sure that he has a minimum expected rate of return in every deal he considers and a 20% interest rate on a $20 million loan is pocket change for him.
His line of thinking may be: MP is worth more than $20 million, the amount he's willing to lose to gain control of the company if MP fails on its loan obligations.
Who knows, maybe the 3 Amigos have something up their sleeve. Like using the money to make the company and balance sheet look prim and proper and pretty to attract a suitor.
Or MP can work out a deal whereby Mr. Frost owns part of the company, which is more acceptable than the possibility of becoming insolvent.
I don't get the warm and fuzzy feeling that Mr. Frost is the white knight riding in to save MP without some consequences to current shareholders.
GLTA.
