I can understand the doubt everyone is casting, but am honestly not able to understand what is bad here due to which the stock hit a lower circuit today. An entity has made an investment. Even a supposedly unscrupulous entity has made an investment in a fundamentally good company that is consistently showing progress and the management is walking the talk.
Per the warrants issuance rules, 25% of the money has been upfront at the time of the issuance with the rest 75% of the issuance price to be paid at the time of conversion. The warrants, per my understand needs to be converted into equity within 18 months of the issuance, barring which the 25% of the initial deposit is forfeited.
Now there are two scenarios that can play out:
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If the warrants are not converted into equity due to them being frozen or any other reason, then JTL gets to keep the money. No harm caused to JTL.
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If the warrants are issued then JTL’s 6% ownership would be with a supposedly unscrupulous entity. Due to a lower ownership, they cannot have a board member and cannot arm twist mgmt into taking less than ideal decisions.
How in either case will it cause a problem to JTL?
How can it cause management to take decisions that can cause problems for minority shareholders?
If I am having an incomplete knowledge or flawed knowledge on warrants, please do let me know.
Excellent article on warrants by Dr. Vijay Malik: Stock Warrants to Promoters: How to Analyse – Dr Vijay Malik
Disc: Invested
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