Some time ago - when EDE was around 30c - I posted that it was...

Some time ago - when EDE was around 30c - I posted that it was difficult to justify the price even on an optimistic fundamental valuation. Completely respect the views of those that were of the belief that I just "didn't get" EDE or this type of speculative stock.

However, leaving aside future valuations, it looks almost certain that EDE is going to have to raise capital in the next six months for working capital purposes (ie to fund current operations, as opposed to the planned expansion of production facilities). To be clear, it looks like EDE will need to raise capital prior reaching its current 1,000,000 gallons / year production capacity.

What complicates the capital raise is TAS's 40% shareholding in EDE. If EDE was to do a capital raise and TAS was to participate, TAS would have to raise capital first. The case for EDE's capital raise is straightforward as EDE shareholders get to participate directly in any capital upside or future dividend stream. For TAS it would be more complicated. The Solomon's would need to explain to TAS shareholders their intentions regarding TAS's EDE shares and any potential dividends received from EDE. Or would TAS simply not participate?

So what does this mean? Would the Solomons just use the 15% cap to issue shares to "sophisticated investors" and bypass EDE shareholder participation in the capital raise? No doubt, if they did this, there would be a significant discount to the issue price and (probably) higher-than-necessary dilution of existing shareholders.

Just think all the uncertainty weighs on the SP (on top of the glacial sales performance).

PS: I also always wondered why TAS traded at such a discount to the value of its EDE shareholding. But I guess it's because of the ever-growing risk that TAS's shareholding in EDE will be diluted if it can't take up its entitlement to any capital raising.