I think GiddyYup is technically correct.
But this scenario means the ASOF group has committed $15 million for shares. This is a lot of risk for common shares in a business with no sales.
What if MST receives no orders until April (mpm? or mst does not even get the MPM contract!??) - Does MST survive to this time or declare bankruptcy. Bankruptcy means $15m shareholder ASOF just lost big time. Maybe another cap raising with ASOF chipping in $2 mil to protect their earlier 15 mil. 6 months later another million? Now bankruptcy and ASOF losses even more.
The risk of becoming the major shareholder right now just seems to high. The notes are 'secured', so why convert to 'unsecured' shares now? Also if these notes include an interest payment (can't remember of top of head), why convert a relatively secure income generating asset to risky asset with no income. investors buy stocks with dividends because the need to make dividend payments to Shareholders 'keeps the bastards honest'.
Furthermore, lets say ASOF has 60% of shares, shares are not secured, directors increase spending on R&D. What does ASOF do? vote out directors, replace the ceo. Now key staff leave or perhaps remaining shareholders leave? (These are the shareholders currently carrying MST) ASOF is left holding the bag!
What if Europe or China or America get worse next year and the people behind ASOF need to raise cash? Selling secured (interest baring) notes is much easier than common shares in an R&D business with no sales. MST shares are not exactly tier one capital assets!
So I think Giddyup has illustrated one extreme. The other extreme is a $50mil order from USSOCOM next month. In the end I think mst will play out in between these scenario's.
At the moment I think; a product sale, SP bounce back to 1 cent, ASOF convert a few notes into shares, new investors, capital raising, another sale, SP rises further, mst becomes self sustaining.
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