The likely impact of issuance of $12.00 convertible bond by Muscle Pharm.
In my last article on February 11, 2013 I spoke about a growing star- a nutrition supplement company. The name of the growing star is Muscle Pharrm (MSLP.OB), which manly focus on active lifestyle of mass people. Muscle Pharm is among the fast growing companies which have a prospective future by folding its revenue generating capacity multiple times. The good news that the company has been coming out from it’s temporary liquidity shortfall, which was due to inflexible funding need to some extents.
The company’s recent initiative to raise fund of $12.00 million by issuing a total of 1,500,000 shares (Series D convertible Preferred Stock) at a price $8 per share may change its financial structure. According to statement of official website of the company, “The net proceeds to MusclePharm from the closings were approximately $10.8 million after deducting placement agent fees and offering expenses”. By utilizing the above fund, the company can do many more than ever. With the above issuance, financial strength as well as financial flexibility of the company will increase to cope with capital requirement of the company.
The above fund will support the company’s business expansion plan; and as an ultimate result the company will earn more revenue as well as more net profit. As the bond is convertible, once it will be converted into equity and the company will get relieve from bearing high interest expense. In effect, its operating cost will reduce to comfort profit margin. It is mentionable that during the financial year 2011, MusclePharm paid $3.70 million as interest expense, which pushed the company more discomfort zone. Besides, the financial leverage of the company will trim down and the company will be turned into an entity with equity based capital structure; which will increase financial slovenly in long run.
I strongly believe that everything is waiting well for the company.