Further invest or not?

Discussion in 'Starting & Running a Business' started by RAR, 20th Nov, 2019.

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  1. RAR

    RAR New Member

    Joined:
    20th Nov, 2019
    Posts:
    1
    Location:
    Sydney
    I have a question about how I should approach the following:

    Two years ago (Oct 2017) I purchased 144,445 shares at $0.45 in a private wine trading company. Financials were as follows:
    • Current revenue $3.2M PA
    • Projected EBITDA $0.3M
    • Market cap $14M
    • Current share volume 45M
    A year and a half later, it became a bit of a mess due to poor governance and financial oversight. I don't think there were any acts of impropriety or wilful negligence, but likewise, I don’t believe that appropriate governance was maintained.

    They had to do a debt restructuring, enter into debt conversion agreements, and issue new shares to raise capital. This caused the value per share to be reduced by a factor of 45 (shares are now being offered at $0.01), while my equity stake has been diluted by a factor of 3.

    Anyway, they've cleaned up all the issues, there is much better financial oversight, and
    I have the opportunity to purchase shares at the $0.01 price. I'm willing to invest $5,000, but is there anything I can do to negotiate a better deal?
     
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  2. Hodor

    Hodor Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,238
    Location:
    Homeless
    Why do you believe this is a better opportunity than others?

    A market cap of $14m with 45m shares outstanding should have been a price of 31.
     
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  3. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    1,461
    Location:
    QLD
    welcome to InvestChat ,

    did the company change ( any ) management ??

    or will it after the cap. raising ?

    often the underwrter of the cap. raise ends up with the biggest slice of the offered shares ( and gets seats on the board if it wants them )

    SECONDLY will that forecast EBITDA include the inflows from the cash raising ( don't laugh i have seen it done before in an ASX listed company )

    i suggest a DETAILED read of the prospectus ( maybe even twice or threes times .)

    please think carefully

    cheers