**Why a Share Buyback is Not Practical***: To briefly review a few facts, the announcement concerns an equity line of credit of up to $40 million. How would this work? Let's say the company wants to draw $5,000,000 from its credit line to pay off debt. It's probably safe to assume the investors would get stock at a discount--let's assume 20%. Let's also assume the stock price is $1.00 when the draw is made. ......A 20% discount means that the investors get their stock at $.80. For $5,000,000, they would receive 6,250,000 shares.
To illustrate why TSIG will not do a stock buyback here, let's continue. Suppose TSIG used the $5,000,000 to buyback shares at $1.00. They would reduce the outstanding shares by 5,000,000 through share repurchase, but they increased the outstanding 6,250,000 in the process of obtaining the money. A losing proposition obviously. . . . .ARE THERE ANY QUESTIONS ABOUT WHY IT'S NOT GOING TO BE A SHARE BUYBACK? |
