New blog from Mark Mohler about Branson & the train!
"The devil in the details (as revealed in the required SEC IPO disclosures) was that Virgin was not taking any meaningful financial risk and there was absolutely no economic validation of the investment opportunity. To the contrary, Virgin was (and is) simply getting paid for the right of Brightline to make investors think they were investing in something other than the already failing Brightline trains run by the same Brightline people. Any actual investment by Virgin was conditioned upon either the success of the IPO or the success of the still necessary (and still extremely unlikely) 2019 bond offering (or other capital fundraising whereby Brightline successfully raises the roughly $2.2 billion shortfall they project even after a successful $500 million IPO). As of yesterday’s failed IPO, Virgin has no current or foreseeable obligation to put any money into this fool’s errand and Brightline is still short around $2.7 billion."
Click the link at the bottom for the full blog.
Mark Mohler is a business attorney specializing in business transactions, contractual matters, entity formations and restructurings, venture capital and private equity financings, project finance transactions, joint ventures, technology acquisitions, technology licenses, business governance and public offerings.
More from The Ledger:
Brightline’s options less clear than its need for capital - By Jeff Ostrowski
#NoTaxpayerFunds #Boondoggle #SmartInvestorsSeeTheTruth
“There’s no compelling reason to believe it’s actually going to work,” said Matt Fabian, a partner at Municipal Market Analytics, a bond research firm in Concord, Mass.
Ince said the scotched stock offering could send a warning sign to lenders.
“With the IPO now withdrawn, it may be more difficult to find lenders, which would jeopardize their expansion plans,” he said.
With a cash flow of negative $6.8 million per month, the money-losing parent of the Brightline train service must look outside passenger revenue for a financial lifeline, said Ozgur Ince, a finance professor at the University of South Carolina.
“Their cash position looks very precarious,” Ince said. “With only $273,000 in cash and cash equivalents, they really needed the $500 million or so cash infusion from the IPO.”
Richard Rampell, a Palm Beach CPA and former board member of the RailAmerica freight line, also sees financial trouble down the track.
“At this rate, they could last maybe a year,” Rampell said. “Then they’re going to be in big trouble unless they can get some more capital.”
Click this link for the full Ledger article.
https://www.theledger.com/news/20190218/brightlines-options-less-clear-than-its-need-for-capital/1