Ann: Status of Mega Bank Facility, page-14

The Thai vendor has not allowed DNA to go under at this point. But otherwise, this is not good news for minority shareholders.

It seems clear that the only source of finance for DNA is the Thai vendor. If they had any other source of finance, they would be in big trouble for taking out a related party loan at such a high interest rate.

If the Thai vendor had any confidence in the future of DNA, he would contribute the funds by way of equity, as he did last year. This would enable him to capture more of the upside if the business recovers and the share price increases.

Instead, he has contributed the funds by way of debt. This shows he is focussed not on the potential upside, but on protecting his downside. If DNA goes under, he will seize the assets and still own them privately.

Also, despite the clear promises made by the chairman, the Mega Bank loan was not repaid by 30 June. Instead the payments will stretch out for another 6 months. And even then, the loan will not actually be “repaid”, just refinanced via the new loan from the Thai vendor, which will have to be repaid in turn.

This means that even if the business recovers, all of the profits will be paid to insiders and related parties, for at least the next 12-24 months. There will be no dividends or buybacks.

DNA shares might eventually recover to somewhere close to the net asset value. But with the markets surging, the opportunity cost of owning DNA shares is huge.