Am I the only one that thinks this financing is a bit fishy? If I were Deerfield, does it make sense for me to own stock or own the "mortgage"?
1. - DSCO isn't going to have significant revenue in any near future yet there will be payments on this loan due.
2 - Any revenue they do get will need to be funneled right back into the company to keep lights on, keep the sales cycle going, and god forbid....... new products.
3 - When payments will be due, DSCO won't have the ready cash and will likely be teetering on bankruptcy anyhow.
So if I were Deerfield, I wouldn't want to own stock particularly if there was a bankruptcy. Stock owners are last on the list to get paid compared to the owners of the debt. Deerfield was basically hedging bets by just loaning money. If they really thought there was great potential, they would have taken an equity stake (dilution) instead.
Seems to me that with this extra debt, DSCO is less attractive as a merger/acquisition than it was before.