The Challenge: Financing an Alternative to PIPE (Private Investment in Public Equity) Financing

The Solution:

Gain faster funding, flexibility, and greater shareholder commitment through use of a securities-backed line of credit of stock-based loan facility.

Your publicly trading company needs to raise $1,000,000 in capital but can’t do asset-based lending and can't afford to wait for a PIPE to be completed.

One solution: Use a stock-secured loan or custom institutional securities-based credit line solution to undertake off-balance sheet financing with shareholders friendly to the issuer. Gain flexibility and greater shareholder loyalty in the process. Shares that collateralize our institutional loans remain in the client's account and title throughout the loan term.

How It's Done:

• John Shareholder, who owns a large stock position chooses to pledge $1.25MM for a new hedged portfolio stock loan @ 80% LTV. (Up to 95% for selected marginable and optionable securities is possible). He complies with any/all reporting requirements, as applicable.
  
  
• Shareholder could then lend $1MM to your company in exchange for a $1MM repayment note at (for example) 9% interest (negotiable), with warrants or options perhaps as an equity incentive.

Behind the Numbers:

Borrower benefits:

Can be structured so that borrower also receives warrants, which could have added value in the future should the stock perform well. (terms negotiated with the issuer). No debt service - since the borrower’s note will run concurrent with the stock loan, the debt service would be carefully structured to be covered by interest paid to borrower on note, particularly if the loan interest was sufficiently competitive (payment terms and dates can be structured to fall just prior to due date for the loan. Remember that the securities remain exclusively in the title and account of the owner, not the lender, at a fully regulated, U.S. SIPC-member institution.)

Issuer benefits:

Quick funding – As little as a week depending on the speed with which the parties operate, compared to many months common to normal PIPE or secondary offerings. Many registration and legal costs associated with PIPE or secondary offerings are not likely to be required with this securities finance solution (as with any corporate financing structure, always consult with a licensed legal professional to assure compliance before proceeding). Shares can go (via warrants) to those who have the best interests of the company at heart with this solution, as opposed to unknown parties whose interests might not coincide with those of the company.*

If you'd like to locate an appropriate lender for your securities-based financing, use a major search engine to begin your search.