In simple terms, the $35m is 48% MMJs. Call it $17.5m. That's 9.6m shares at $1.82. If you pretend there was no CR, and we just sold 9.6m shares, we'd have 42.7m shares down from 53.3m.
Currently we have 53.3m / 109.4m shares (inc escrowed) = 48.7%
Take that down to 42.7m / 109.4m, that'd be about 39%
Factoring in the latest CR, 35m shares @ 1.82 per equates to 19.2m shares added to the pile for a total of 128.6m. With MMJ still holding 53.3, that equates to 41.1% so percentage wise we're better off post CR as compared to selling the equivalent value of shares at $1.82
Another upside is the introduction of new money, (and the hype surrounding it) which can be used towards expansion and ideally lead to more marketable goods in a shorter timeframe, increasing the ROI.
If it was just a straight sale of shares by MMJ, the consolidated entity of MMJ/HVST would only have half as much to fund expansion, assuming MMJ loaned it to HVST to use the cash from the sale.
Alternatively MMJ could let it sit on the books or add another horse like ESE or Weed.Me to the stables, but there would be no improvement to HVSTs expansion potential. Depending on the horses at auction, this could go either way, but I'm in favour of HVST expanding ASAP, and it'd be my choice between the two.
Even factoring in the 10% discount to the oversubscribed CR SP vs the $2.03 it halted at (19.2m * 0.21 discount = 4m), this should be regained soon enough. With post CR 128.6m total shares, the consolidated entity is at breakeven when HVST market cap is back at 222m (as it was on close @ 2.03), so that'd be when HVST SP is 1.73
So as long as HVST doesn't slip down 10% from last close @ 1.81 to 1.73 or less before the CR takes effect, the consolidated entity is ahead. Given that it was oversubscribed and we're sitting on a stack of buds I don't expect that to happen or stay that low for long if it does.
As for MMJ in isolation, pre-CR value of 53.3m shares @ 2.03 was worth 108.2m. Shares on issue+escrow doesn't impact MMJs breakeven. We need HVSTs SP to regain 2.03 for MMJ's holding to be worth 108.2m again. Should happen soon enough (I'd expect before EOFY at the latest).
Looking at it from a percentage perspective, MMJ's post-CR 41.1% holding needs the MC of HVST to hit $263.3m to breakeven, which at total share count of 128.6m is..... $2.05.
Disclaimer: I rounded stuff a bit with my calcs to its close but not exact.
TL;DR - Once HVST cracks back over $2, MMJ has lost nothing but percentage, and HVST has gained enough cashflow to yield more product sooner. IMO, percentage loss isn't a concern as we run the board anyway, and as previously mentioned MMJ is already at less than majority.
@andreas - You owe me an ounce for all the times I've had to explain your moves to the ASX crowd mate. Your local PR mob is worth less than a dimebag.
MMJ Price at posting:
56.5¢ Sentiment: Buy Disclosure: Held
