Sorry, I get the usual startup equity -> debt thing.The...

Sorry, I get the usual startup equity -> debt thing.

The challenge I have in understanding that particular point is non-equity typically implies debt. But lenders like to secure debt against something of value, and also have some belief that they will be repaid. The latter implies positive EBITDA otherwise the company can only service the loan through capital raisings which is a nice recipe for disaster. Hence I'm trying to understand what realistic options there are for non-equity financing.

Common options like sale-and-leaseback don't fit because there's no physical assets that fit that model. Selling the IP?! That leaves RFX in the position of basically being a sales organisation and I can't see how that's desirable.

However all of this is only the second part of the sentence.

"Pursue options for further strategic investments" doesn't appear to rule out equity... so maybe a(nother) large cornerstone investor is being considered.

On another note, some notable differences between this offer and previous CRs: it's not underwritten, and Simon has not telegraphed his intentions. If you go back to previous CRs they were all underwritten and Simon always said what he was going to do, including taking up all of his rights, and sub-underwriting.

This leads me to wonder if there is an intention here to soak up as many shares at 4.2c as possible.

Without stating his intentions it may leave other shareholders wondering whether they should participate. If they don't participate, it leaves more shares available if Simon wanted to increase his % holdings.

Interestingly (and IANAL), the 20% acquisition limit doesn't appear to apply in this situation due to s611 exemptions for rights issues. http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s611.html

So my hunch is that we might see Simon soak up a larger-than-proportional chunk of this offer and emerge as an even larger % shareholder.