It’s essentially a high interest loan convertible to equity. The equity conversion occurs in tranches of, say, a fifth of the debt at a time, at a price 15% to 20% below the VWAP of the last week, or month. So if they borrow $5m, and the VWAP is 20¢, the first tranche would convert at 17¢ for 5,882,353 shares which they hope to sell into the market for more than $1m. They aren’t interested in Pensana or rare earths, this is how they make money. Selling the shares depresses the price, so the next tranche is at, say, 14¢, for more dilution, and so on until the debt has been converted and sold.
Pensana get their short term financing, the finance company make money, but shareholders are diluted. It’s basically for companies who would find it difficult to raise funds otherwise, in this case as an interim measure between the PFS and the DFS, after which they anticipate being in a position to raise finance on better terms.
PM8 Price at posting:
20.0¢ Sentiment: None Disclosure: Not Held
