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Very thorough response - I thought someone wrote that they paid...

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21/06/18

09:18

Post #: 33846261
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Originally posted by pikel1980 ↑

Unless it runs out of money.

At 31 December 2017 they had $51 million in the bank. In March 18, they raised an additional 100 million.

So they would have had $151,000,000 in the bank.

Their latest update states that they are projecting have $31 million in the bank on 30 June 2018 (cause you know their projections in the last 8 weeks have been so spot on).

So in 6 months they have had cash outflows of 120 Million dollars, circa $20 Million a month.

The Preliminary Annual report is due out on the 18 August 2018. Based on the current spend, that is probably the day that they run out of cash, given that if their own market updates are correct, there will be 6 Weeks of cash left in the company.

So what do they do? They have a few options:
1. Stop seeding funds - but then you have essentially conceded defeat, and the business will fold.
2. Cut costs and seed funds from surplus cashflow - hard, the volume of cash that it would contribute is too small.
3. Raise capital - Difficult given that you probably need about $50 to 100 mill to keep the machine going.
4. Seed with debt - big red flags to institutions if you did this.
5. Exit some funds - yeah, but then the real exit value of the investments hits the market and you get hammered again (note Foundation Learning)

So if i was sitting there I would be looking at a blend of all 4. I would:
1. Get more selective on the funds I am establishing, go for quality.
2. Cut costs and bring my cash outflows down to $50 Million / $60 Million - All for seeding new funds. Do this by lowering the co-contribution levels.
3. Bring in a new shareholder who will co-invest in the new funds. Not sure of the timing but they should be able to issue some of the shares and make the rest subject to a proposition at the AGM. Also at the same time I would do a 1 for 1 raise with existing shareholders, that should raise you about $20 mil in new cash from the new major shareholder plus 20 mil from existing.
4. Exit the funds you can, that should bring back another 20mil plus some of the accrued management fees. Hopefully another 20 mil+
5. Run the PR Machine again and see if you can start the merry go round again - looking to do another 50 mil capital raise again in 12 months time.
6. Hope the share price doubles.

But I don't see them finding the body to take the stake and co-invest...

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Very thorough response - I thought someone wrote that they paid a divi in there - was that part of the cash flows? If so then the $20m per month isn’t recurring outflow - I can’t see them paying a divi again for a few years assuming they get the ship righted.

Severe cost reduction is a prerequisite to matching revenue and then valuations can be estimated.

Biggest risk I see is debt covenants - Babcock etc

BLA Price at posting: $1.49 Sentiment: None Disclosure: Not Held
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