Interesting Times for VXL

I was kicking the tyres with a few acquaintances who are more in the loop than I with stocks. VXL were road showing with Rob two weeks ago and I think still last week. Unfortunately it is not as innocent as hoped as they were themselves kicking the tyres themselves for equity. The amount being quoted was between $15m and $25m which would be highly dilutionary given the current market cap of VXL. Between ~$7m to refurb the already “refurbed” plant, ~$5m to cover the short term facility plus working capital for at least a year, these numbers stack up. This confirmed a growing concern that the debt facility could not be very forthcoming without the initial plant being up and running beyond the planned 50% rate until the plant and ben fixed up fully. The big problem is that putting away such an amount of equity is that it would be issued at a steep discount and most likely with options or some other incentive. This would completely blow up the capital structure and kill any chance of shareholders generating returns without out stumping up big time.

Between the miss-steps, the recent back peddling on advanced products, and poor disciplined in capital management, I am not prepared to continue fund the business to fixed up what should’ve been already working and as such I have liquidated all of my stock (contrarian indicator?). I will retain my options because they are just that. If I’m wrong and or any equity is less and the debt financiers play ball, then I get to participate and if not no big loss. At this point VXL is now too big of an opportunity cost compared to the other opportunities available in the micro/small cap space.

For those that stay on and take the risk good luck, I hope it works out better than I think it will. If this next potential raising is the one gets them back on track, then I may be back when the payoffs look better and the destruction of the capital structure is done.