Supposedly billions in revenues and this company has very little cash ($3m last report)? Probably why grower payments weren't being made. Sounds like a rob Peter to pay Paul scheme has been going on.
Something seriously wrong here IMO. Banks have a tight noose for a very good reason, company not forthcoming to investment community on any progress or news, additional audit committee assistance had to be brought in a month after accounting irregularities announced, lack of working capital, SEC & DOJ investigations continue, company doesn't respond to reasonable investor inquires, no interest by PE indicated to date and they are quickly running out of time and unable to give investment community any reasonable assurances.
If it looks like a duck, walks like a duck, quacks like a duck (or doesn't in our case), then it probably is a duck. House of cards.
Have you ever wondered why the banks are leaving DMND with such little operating capital in the new forberance agreement? Seems like a cash grab by the banks as agreement requires DMND to hand over any cash on hand to banks in excess of $10m, more than it is any kind of confidence agreement between the banks & DMND. Clearly banks nervous. Further requirement by banks for them to find additional sources of capital makes the arrangement more like a short leash / life support arrangement. Seems like a really odd arrangement if they are confident in DMND as an ongoing concern. Has to give one pause.
Even if the effect of securities fraud is not enough to cause bankruptcy, a lesser level can wipe out holders of common stock because of the leverage of value of shares upon the difference between assets and liabilities. Such fraud has been known as watered stock, analogous to the practice of force-feeding livestock great amounts of water to inflate their weight before sale to dealers.
Appears DMND has been a "watered stock" for years. Suspect restatement likely will show it is still bloated even at 20 and that is not even taking into account litigation issues that will face the company when fruad acknowleged.
pddnap52 thanks for some quality posts and for your publishing sections of forebearance agreement.
Let's look at this thing from 20K foot view. First, what is the sustainable EBITDA going forward, given diminished spend for marketing? Are we at $100M? Trying to put together a conservative case here...not claiming this is a true number.
Second, what kind of Debt to EBITDA ratio will the banks tolerate? Maybe 3x? So that means they will allow $300M debt versus the $531M reported by Yahoo today? So we need to raise $250M equity, pay $231M to banks and use the rest for working capital. Do you see a different number for the raise?
So we raise $250M worst case by equity alone, and that flattens the price of the stock considerably. But once that is done aren't we largely out of the woods?
Third, regarding lawsuits, let's assume that they didn't falsify numbers, but just moved recognition of expenses to the wrong time periods. How much do you think they spend to make the existing suits go away? I guess we need to add that amount to the capital raise.
I guess the point of this exercise is to show there is a liquidity issue here, but probably not a liquidity crisis. If they act to raise the money quickly enough, there is sufficient market cap to get them out of this situation. A private equity investor is going to want better terms than equity raise alone I think.