Technically, the GUMM financing looks like a floorless to me, but a pretty benign version of a floorless. My reading of these filings:
It is floorless in that the preferred shares are convertable to common stock at 80% of the average bid price for the 20 days prior to the 2nd anniversary of the issuance. Also, both the principal and interest on the redeemable notes can be repaid with shares of common stock, at a price lower than an average closing bid price for a time period prior to the repayment. There is no floor on the conversion price for the preferred shares, nor on the price at which the notes can be repaid with common stock. So technically, there is no ceiling on the number of shares that could be issued as a result of this financing.
However, IMO, this is a relatively benign version of a floorless for several reasons:
1. The preferred shares appear (under most circumstances) to be convertible at the floorless price only on the 2nd anniversary of the financing. Most toxic floorless issuances allow a long window of opportunity for the floorless conversion, allowing the bandits to choose a time when conversion is most beneficial to them.
2. The redeemable notes can be repaid in either cash or stock at the company's option.
3. There is prohibition on shorting the stock by the purchasers (except they are allowed to short 300,000 shares, equivalent to the number of warrants they also received through the financing). Most floorless financings either expressly allow shorting, or do not specifically address the issue.
My overall impression is that while this is technically a floorless, the floorless provisions appear to be more of a protection for the purchasers, rather than a vehicle for driving the stock price down.
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