The big big (BIG!) capital raises of yesteryear are likely just a distant memory, at least for a little while. The sector downtrend and relatively stagnant growth rate of sales has reduced capital availability with a vengeance.
$HITI recently announced a small convertible raise on Friday , with funds stated to be used for incremental store construction.
While I like to see outfits using raises for specific purpose (as opposed to ‘general corporate purposes’ …ugh), we’ve also looked at the cost of raises (and even hiring people) over the past few months to see if/how the cost of money to business is changing over the past 6 months or so.
$HITI raised $2MM at 10% interest (payable in shares), and they are convertible at any time between now and their 2 year maturity at $0.252CAD. Warrants went with them: $0.50 2 year tenors.
Despite the relative simplicity of the deal, its’ valuation isn’t as simple as describing it. I encourage the interested reader to try, and ask if there is any questions, I’m happy to walk you through.
I get a total cost of ~=$2.6MM – all in shares for $2MM in cash, which thumbnails to an effective interest rate of 15%/annum. Dilution is also present. But in the large, it’s a far sight lower than many of the raises of late (and to come). Purpose built raises that are tied to specific assets are far easier for people to understand and value – and the scale of this probably kept it to friends and family.
Just some finance back-office errata for your Sunday.
The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds position in$HITI
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