I have to admit, with the benefit of hindsight, that the cap raise last October was extremely well timed.
Given what is happening in global markets consider the terms of the raising:
MSL issued a convertable bond to Taubman for $4.5M with a 3 year term and a FIXED conversion price of 20.78c per share. Bonds of course come with a coupon rate as a way of countering the risk of locking ones capital up for a given time frame. The interest rate for this bond? 0%. Yep no cost at all, consider that in the context of the current inflation conditions and what is surely a much tighter credit market. This potentially gives Taubman an incentive to facilitate some opportunities in the US, and those opportunities might start coming thick and fast. Can't ignore the downside though Taubman is a big company so that shareholding could potentially become an overhang, MSL has 3 years to make the most out of the opportunity.
Concurrently MSL raised a further 4.5M in an oversubscribed SPP. Subscriptions equalled 6.5M. There was no specified need for the capital at the time but to have excess capital now for a rainy day is a good thing indeed. As a double bonus part of the capital was used to retire increasingly expensive debt. Perhaps they did have a crytal ball!
I think that MSL is in an excellent position, they have a viable business, are well funded and will have real growth opportunities presenting in a declining business environment. Companies of a similar size who have a hand-to-mouth funding model are going to find it tough over the next few months with investor sentiment falling rapidly. Lets not forget that their businesses were impared by social distancing measures around the world so even in a declining economic environment there will be some cushioning as their niche markets recover. I am enthusiastic at these prices.
MSL Price at posting:
17.0¢ Sentiment: Buy Disclosure: Held
