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Refinancing a small public company

Atul  Madahar's Profile

I was asked by a CEO of a penny-stock public company about financing options. He inferred that his company was running out of cash and needed to refinance itself to survive. They do not have significant assets aside from some IP, so debt financing maybe out of the question. As far as I know, I think his options are doing a PIPE (private investment in public entity), or issuing more common stock. Obviously both are dependent on the appetite of new investors. Are there any other options open to him?


Topic Expert
Joseph Ori
Title: CEO
Company: Paramount Capital Corporation
(CEO, Paramount Capital Corporation) |

Yes, a PP of stock or maybe covertible preferred. If they own their building, a sale/leaseback.

Edwin McGusty
Title: President
Company: Arnold & Constable
(President, Arnold & Constable) |

If the stock is somewhat liquid, they might be able to consider a shelf registration. Essentially an investor/group buys stock at a discount and sells the shares to make a small profit and then repeats the process. Being a penny stock, I have a feeling that it might not trade sufficiently.

Another possibility is a stock loan if the CEO has a large postion, he might be able to use that as collateral.

The reality is that it is probably time to do another raise if they still believe in the future success of their company. It's hard to give much real advice without knowing particulars.


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