1) Convertible notes are converted to shares to raise a set amount of money. In this case, as part of the settlemt for Hill 50. At the time of announcement MON were 27c (pre consolidation) That equates to 81c in todays money.
The conversion at price of 80c to raise $15 million would require the issue of less shares than the conversion at say 50c. Now when converted more script is out there.
The issue is for $15 million, along with $20 million in script component and the rest ($30 million) in cash.
Thus as the price decreases in this market, a conversion would require more shares to be issue and as such, increase the issued capital, measured against the asset value (assumed unchanged) results in a lower value per share. When markets move, con notes can chase the price down as people know they will have to convert sooner or later!
In the same way, an increasing price, results in a virtuous situation for existing shareholders when con notes are converted as the holders get a smaller % of the company when converted.
2) Caught in the capital markets referred to the fact that an agreement had been made to purchase an asset, which is fair enough, but the price was set at a time when debt and equity was more available. Availability of finance was easier and this reflects the price of the sale (same as it does in any market). The trouble is, the funding of that purchase has to be made at a time of considerably lower valuation (both in share market and what someone would pay for an asset as well), as such, with bad luck they have been caught exposed in the wider turmoil of the capital market fluctuations.
Going to get debt/equity is harder now than it was at the end of October when the deal was done (announced at start of November)
Deal is done now - should MON not complete they lose half the $5 million deposit.
I hope this helps.
MON Price at posting:
0.0¢ Sentiment: Sell Disclosure: Not Held
