All IMO
This is share my frustration and worry and not predictions for the future of OGX.
Some facts that worry me about Magna that is providing us with $8 million funding. They are a lender of last resort and do not hold the stocks of troubled companies; It is offloaded (it is a risk to hold on) as long as there is liquidity. They get the stock at considerable discount so they always make a good margin. This means downwards pressure on SP.
The fact that OGX went down this path instead of placement means they did not need to disclose current situation of the company in the prospectus to the public.
Fact from 2015, Magna has done deals with at least 80 companies. Of those, the stocks of 71 have gone down since the investment. Hence it is also called “death-spiral financing”. More the stock goes down Magna get the discount from that rate and sell. Stock goes down more. And so it continues.
An analysis of 80 public filings shows that a company that does a deal with Magna sees its shares plummet 55 percent over the next year, on average. Most never recover and wind up trading for thousandths of a penny or less.
Example given, Pervasip, was developing a communications app to compete with Skype, but it was down to its last $100,000. $75,000 loan given by Magna in the form of an “8 percent convertible promissory note,” meaning it asked for an 8 percent return and gave Magna the right to convert it into stock. The fine print explained that if Pervasip didn’t pay back the money within six months, the lender could convert at a 45 percent discount to the market price. In OGX case its 10% and 6 months. Pervasip didn’t repay, and gave the discounted shares to Magna. SP bounced up to 3¢ for a bit but Pervasip then traded for nine-thousandths of a penny. I hope that’s not us.
Now for OGX I wonder;
Have the drawn the first $2 Mil and how will this affect the share price? Also if all 4 x $8 Mill is drawn where will we stand? Even if production rises over time will it withstand the downwards pressure from selling by Magna?
Is this funding really for exploration or surviving or is it to pay back Cartisian group CRH?
I hope OGX is the exception to above but it is only a hope at this stage.
Source of the article is
https://copper.com.au/threads/asx-avq-magna-lender-of-last-resort
