Ann: Trading Halt, page-74

Hi Dui,

Not necessarily, the official reason given by GS for today's TH is simply: "regarding a capital raising". This is a bit vague for my liking.

Whilst the most likely option is a placement to existing shareholders, I would not rule out an institutional/private placement. Particularly due to the fact that GS must surely know that he has sorely tested the patience of EDE shareholders over the last 5 years, and therefore he should also know that this patience is very near its end i.e. the well is almost completely dry. The harsh reality is, is that EDE, with EdenCrete, is still in the start-up phase, a phase that EDE should have left behind ca. 2-3 years ago. Fortunately, it appears that EDE will leave this start-up phase in 2021.

I believe that today's CR related announcement is a last ditch effort by GS at a "public" CR in order to raise some "cheap" cash. A "public" CR is clearly the cheapest way to finance EDE (it is basically interest free, apart from some small fees). In effect, through a "public" CR, it is mostly EDE's shareholders who are funding EDE by offering EDE an interest free loan for an unlimited period, in the hope that they, the lenders, get a very good return on their investment in EDE (which unfortuntely, for most investors at least, has not yet been the case).

With respect to the dilution aspect of each new EDE CR (I believe there have been 10 of them over the last 5 years), it should be pointed out that GS, the rest of the Solomon family and TAS, who together are the major shareholders of EDE, are really only interested in the overall value of their shareholding in EDE i.e. to them it is all about the MC of EDE, not the number of shares that EDE have on issue and thus the level of the EDE SP (this is very common).

This can be best explained as follows (with relation purely to TAS's shareholding in EDE):

1. With a MC of A$50 million and 900 million shares on issue, the value of TAS's 33% shareholding was worth A$16.5 million.
2. With a MC of A$50 million and now 1.8 billion shares on issue, the value of TAS's 33% shareholding is still worth A$16.5 million.

The difference between 1. & 2, is of course the EDE SP.

In scenario 1. the EDE SP is 5.56 cents. In scenario 2. the EDE SP is 2.78 cents. Therefore, a "public" investor who has not participated in any EDE CR's at all over the last 5 years, will now be sitting on a 50% loss on their original investment (if they bought in 2015, did not top up "on market" and are still holding in 2020) i.e. only investors who have participated in every single CR (pretty unlikely) will not have lost any money on their investment in EDE. Having said this, they haven't earned anything either.

CR's can often be summed up as "dammed if you do, dammed if you don't" when it comes to deciding on whether to support them. The factors that I use to make this decision are a. the fundamental position of the company, b. where they are in the overall investment cycle, c. the macro economic backdrop and d. the specific industry related situation, all right at the time of the actual CR. Whilst EDE, more specifically EdenCrete and Optiblend, have never ever been in a better place, history has shown us, particularly with GS and EDE, that this is no guarantee of success.

Cheers.