Savvy, not on the cards I feel, but savvy all the same:p The...

Savvy, not on the cards I feel, but savvy all the same


The thing to always keep in mind is that almost without doubt cash flow trumps shareholding when you are at the stage AVB are at, to be frank it is way way beyond this stage too. Why? Well firstly the word risk and liability spring to mind. But the sort of cash flow I am talking about is the wages, salaries and consulting fees which flow towards Directors from general reserves, weekly or monthly and over long periods sometimes forever without ever any similar cash flowing towards the company, it generates it's cash by mining shareholders, harsh term but not far from what happens.
I do NOT in any way put AVB in this category, however one has to be watchful because different entities connected with the stock may want to pull in different directions. I can't overstate the importance of debt funding for the $58 mil and from what we have been told this is exactly what will happen, it is what I expect to happen.
As a general view Directors at this sort of stage could be forgiven if first on their mind is next week cheque, dividends or massive capital growth will not out pace wages and fees any time soon for them, and whilst we all like to see this develop at a very fast pace, its so rare to out trump the afore mentioned cash that we can dismiss it. On the other hand for exactly the opposite reasons shareholders love debt and hate CR. Why is this so? Well first and foremost when a bank loans a company cash it is the directors who are in the gun, have you ever read your mortgage doc in full not to put too fine a point on it you are very much in the gun and can be hung out to dry on the smallest hiccup, same with company directors, they have been known to get hand cramps from sign personal guarantees and several changes of underwear hence you always have to watch track record of who is running company and that all important trust.

Just how could it work if it was not debt? A caveat first, I know a large block who would not like this and it is very doubtful 3 out of 3 sig holders would play, making the block a bit of a boulder. But anyway this is all for fun anyway.

So seeing as this is just for fun, lets say a couple of sig holders teamed up and said, hey boys want a deal too good to refuse (steak knives etc.), we will engage in a selected CR to raise say $30m. Now you leave the price to us, after all, all you need is the holders on side...right We will raise the cash and we will do so at a wonderful premium to your SP (note no talk at this stage of what the SP is, just we will say GIVE you 15% more! that is massive right, but wait we could do better, perhaps 20% premium we just have to do a little market work you get it right. And the cream on top is that you mr director have no extra liability at all, zilch, how good is that. Sure you will all own less of the pie, but hey remember your salaries and fees are solid as a rock and all stress free. We feel the pain, we get diluted too, plus we paid that massive premium....right...how on earth would we ever get that back sounds good hey boys, well just sign here.

I am being a little extreme here and if any such fanciful thoughts were in anyones mind I would be well gone anyway, just a little poster banter on a weekend while we wait for the signed off debt funds.