Throwing Good Money After Bad
Adrian J Cotterill, Editor-in-Chief
Yesterday (December 23rd), Wireless Ronin Technologies, Inc. announced that it had issued an aggregate of USD 1,075,000 in unsecured convertible promissory notes, along with warrants to purchase an aggregate of 1,075,000 shares of the company’s common stock, in a private placement transaction with certain accredited investors.
December 24th, 2013 at 17:39 @777
I had a look at this private placement and thought it over. A 4%, 2-year note convertible at $0.50, or essentially the price upon execution of the note. Plus 3-year warrants to purchase shares at an exercise price about 45% above the current price.
My analysis was that the $1M buys them about 100 days of existence, since they burn roughly $10K of cash per day, even after making significant cuts. Then there is the next and final payment by Delphi, which buys another couple of months. So in essence, making this note would be a bet that they can turn the ship around in six months. Pass. No reason whatsoever to believe this is possible.
Whoever made this note has to be someone who is already in deep, trying to buy time. Since they are subordinated to Silicon Valley Bank, there is a good chance that conversion will be the only way to get even a small part of the principal back in the downside scenario. And looking at performance, the one bet I would make is on the downside.
December 30th, 2013 at 21:46 @948
Doesn’t this seem like a really bad deal for the investor? So they are giving up cash that they will never get back on the promise of 4% interest and the right to buy stock at the current price.
If RNIN goes under, investor gets nothing.
One would wish that new companies with good ideas who may someday create a profit would have the access to that kind of cash instead than this company that’s been asking for a “longer runway” for the last 5 years.