Hi @RichMan73, Why would they pay in shares and not cash?...

Hi @RichMan73,

Why would they pay in shares and not cash?

Firstly, both parties would see potential growth.  Because at the moment DTM don’t have sales, sufficient short term collateral, lenders such as banks are risk averse and with the Royal Commission into banking maybe regulatory overhang will be greater it is easier to get someone else on board.  It implies DTM have sound networks, trust and due diligence has been done by the other party. The other party would have inside knowledge with a view to getting more work in the future.  Win/win.

DTM management are finance guys and would work out the true value of an inducement to a service  provider to be given shares in lieu of cash.  Its not like its a huge stake in the business that would cause future conflict.  There may be tax incentives for the provider and greater long term profits.

This transaction may appear generous for the amount of work to be done when in fact it’s part of a strategic framework assuming DTM know their stuff, true cost v operation would be small beer.  Therefore it’s in both parties best interest to foster good relationships to maximise that growths potential i.e quality reports in this instance because the service provider has a stake.  It’s really a vote of confidence with a new provider.

With suppliers being engaged it reduces the burden of administration and getting finance so DTM can have a bigger pool of working capital and less competing priorities.  Don’t forget the learning process with using people with more knowledgeable expertise.