It is either an interest free loan as in RAD or regular cash in...

It is either an interest free loan as in RAD or regular cash in the bank payments as in DAP I am agnostic.

Not sure why you are so agnostic about RADs or DAPs being the funding source.
In terms of capital flows into (or out of) the business, those interest free loans, as you rightly describe RADs, are really a whole lot of future DAPs paid up front by incoming residents.

Trouble is, the manner in which RADs become redeemable is completely outside of the control of your company and its management. And while the impact on the P&L will be insignificant in the event that the company is faced with net RAD withdrawals, the impact on the cash flows of the company - and hence the balance sheet - are likely to be dramatic.

For, to date, RAD flows have all been in the one direction. But what happens when the flow reverses? (I hate to mention it, but that exact same question is very relevant to Ponzi structures.)


The AFR is focusing on a subject matter which is immaterial. If need be (I don't think so),
a $50m placement about 1 for 10 can be raised without a sweat.

We are talking about a figure of $650m. In the context of a market capitalisation for EHE of $525m, and a balance sheet that has negative tangible asset value of some $340m, that doesn't sound like the exact opposite of an immaterial liability to me.

$50m of additional equity capital won't bring about much improvement in the capital structure of the company. You'd still have $300m of negative NTA.

Of course, you can argue that this doesn't matter.
Well it doesn't, until one day suddenly it does.

And, as I observe DAPs increasingly being favoured by incoming residents over RADS across the industry, that day of mattering seems to have arrived.

I strongly suspect that the thing that is worrying the market bout EHE is not so much the interest bearing debt being borne by the company (which supporters the stock are saying is manageable), but by the non-interest bearing debt, which is several multiples greater in magnitude, and whose terms of redemption are totally indeterminate.