I have been lurking here some time, and today I am posting because I think the deal with Cornell could be viewed a little differently.
With this CORNELL deal, am I correct in the following logistics:
- CORNELL gives $ 2 million to NEOM, of which NEOM immediately returns $ 100,000 to CORNELL (according to the agreement I read)
- CORNELL receives $ 2 million of shares, based on a price of 98% of the lowest closing bid price over five days
With the above arrangement, CORNELL could sell the $ 2 million of shares over a five day period, and thus have received $ 100,000 up-front from NEOM, and any gains on the discounted shares (98% of closing bid) they just obtained.
If CORNELL were to sell the shares they obtain, and this were to occur perpetually on a weekly basis for one year, CORENLL has in fact not risked $ 100 million, but only $ 2 million, which they have going out and then being returned to them via the $ 100,000 NEOM payment and the selling of the shares. As such, only invest $ 2 million once and then simply roll-it over weekly.
NEOM would receive $ 2 million (less the $ 100,000 payment), for a total of $ 95 million over a one year period. If this $ 95 million is spent on physical assets then the share dilution is a wash since the value of the company doubles as do the number of shares.
However, if NEOM were to spend the money on paying large bonuses, the $ 95 million could be obtained and spent with no appreciation to the value of the company; in theory, not suggesting that is the case here in any way.
So the belief that Cornell is investing or wants $ 100 million of the company is not correct based on the logistics of the deal in theory. As to NEOM buying their own shares with the money recieved - this would make no sense, since they would have to be buying them back at higher prices then they just issued them at, and thus the net result would be more shares o/s and no new money in the bank - especially consdiering NEOM has to pay $ 100,000 of every $ 2 million they are to recieve. Which is 5%, nice rate for week of having your money tied up, from Cornell's persepctive.
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