Hive Blockchain Technologies (TSXV: HIVE) quietly announced this morning that it is conducting a private placement of convertible debentures exclusively with interim Executive Chairman Frank Holmes’ fund, US Global Investors. The debentures, which will see gross proceeds of US$15.0 million raised, follows the funds’ late night filing yesterday, indicating it had sold C$26.6 million worth of securities in the firm.
The convertible debentures are to be unsecured and contain a maturity of five years from the date of issuance. The debt will bear interest at a rate of 8% per annum, while being convertible at any time at C$3.00 per share. Furthermore, interest is to be paid monthly on the debt, while principal is to be paid quarterly.
The company has also issued US Global Investors 5.0 million common share purchase warrants of the company, valid for a period of three years with an exercise price of C$3.00 per share.
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The financing has been viewed as a relief by many investors this morning, following filings that were made late last night wherein it was revealed that the US Global Investors (Canada) Ltd fund had sold out its entire 8.5 million share position over a period from December 18 through to December 22. The relief is a result of the revelation that Holmes’ appears to be sticking around with the company, while investors pay little attention to the fact that the sales on the open market are effectively funding this new financing, with interest and additional warrants being added on top.
The sales transactions as a whole brought in C$26.6 million (US$20.8 million) for the fund, a significant gain considering the shares were originally purchased at a price of $0.30 per unit under Hive’s initial go public transaction on September 7, 2017.
The company has positioned the transaction as being a positive for the firm, with Holmes stating, “The financing is being completed without the usual 6% broker fees, and the cost of capital is much less than the 16% cost of capital associated with leasing equipment for crypto mining.” Holmes does not mention the actual cost of capital however for the firm, despite providing the commentary.
Hive Blockchain last traded at $2.47 on the TSX Venture.
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