Road from here, page-5

The underlying business will probably make money at some stage in the future but that is fairly irrelevant at this point in time.

The class actions are a very real potential liability given the circumstances. If the company loses the case, the magnitude of the claims is well and truly enough to bury the company given the current balance sheet and their funding options. If they lose will they have to pay the whole amount or only an excess? how big is the excess? Only the fine detail in the insurance contract (if they have one) around negligence or possibly fraudulent disclosure can answer that question.

So to make an informed punt here you need to understand the likely outcome of the class actions. The insurance cover in place AND more importantly what the debt holders think the likely outcomes will be because they already have the trigger to terminate the current ownership structure and have first go at the carcass.

They won’t be able to raise more equity to fund a negative class action outcome – the banks don’t need to lend them any more money to change management and wipe equity. The underlying business seems to have very little capacity to produce FCF to cover any claims in the short run.

If you are buying equity here you are betting on the class action outcome & insurance cover [actually you are betting on the banks ‘opinion’ of class action outcome and insurance cover because given the last announcement and current covenants the banks position is locked and loaded with a finger on the trigger]

There is good upside here IF they get through – but make no mistake, regardless of the ongoing merits of the business there is 100% downside to equity (and if it comes it will be during a trading halt – so no chance of escape because you’re a nimble trader)

Your only real control here is to position size according to the risk.

Stay safe out there people.