Um, OK so they are so hard up for cash that they got a $10 million increase on their line of credit and as a penance for that they issue 700,000 shares of restricted stock worth nearly $5 million at market value!?! Only a desperate organization would give $5 million in stock in exchange for a $10 million CREDIT line increase. #$%$??
Yes. The entire package, $10mm of the 8% mortgage bonds due in 3 years done at par + the 700k shares done at nil equates to roughly 12/13% cost of capital for the company. Expensive money yes, but not the end of the world. When you add in that the bonds require no interest until maturity and the shares are restricted as you mentioned, it is less outrageous still, especially considering how crucial that capital raise was to the company. It how has no capital needs into the middle of next year, when it should be able to see clearly to first water. Your mock outrage is misplaced....
I haven't tried to calculate the 12-13% number (how do you calculate that out of curiosity...seems low, if you think there is value to the equity) - anyway, the one caveat which you aren't mentioning is that the lender acquired the bulk of the debt at a discount (which I don't think has been publicly quantified) - so they may be thinking of it as a penny on the dollar speculation at this point, where they make a profit even on a partial recovery of debt -
Uh 12/13% is junk bond territory and clearly illustrates they are running out of easy money. To me it is an indicator that they are having a rough time raising fund. If you don't think 12/13% doesn't illustrate that then you are blinded by emotion for this stock or the company.