It’s a beautiful holiday, so we’ll keep this short.
Our headline literally said “Purebread isn’t fixed”
We said the balance sheet was ugly, dilution was real, financing risk remained, and more capital could be required.
Our argument was simply that “the restructuring was changing the survival equation” And with that BRED has a significant upside if the operators scale this brand effectively. In addition, they didn’t go through this amount of work to fold it now.
(If folks don’t know who’s behind this yet) You can to Purebread Brands Inc. Announces Closing of Previously Announced Debt Settlement and dig in a bit.
Interestingly, a recent alternative review effectively concedes that point. The previous thesis contemplated the company potentially not surviving another 12–18 months. The updated view now acknowledges that outcome is substantially less likely.
That matters.
So does what happened to the financing.
Saying much of the April raise is “already gone” sounds dramatic, but the cash flow statement shows almost $600,000 went to loan repayments and another $417,000 to lease obligations.
Paying down the very liabilities everyone is worried about is not the same thing as simply burning through a financing.
And since our original review, another important piece of the restructuring has been completed: $3 million of facility debt was exchanged for 20 million shares and 10 million warrants.
For anyone unfamiliar with the capital stack, senior secured debt sits ahead of common equity. A creditor voluntarily exchanging part of that senior claim for equity is moving down the recovery waterfall.
That does not prove the stock is going higher. It does not eliminate the risks.
But it certainly matters when assessing whether the company is simply headed for the ground.
Creditors can restructure distressed debt for many reasons, but they generally do not surrender seniority unless they see some economic benefit in the equity optionality or continued enterprise.
Again: the restructuring and people involved now changed the survival equation.
We will leave the final word to Stuart Smalley.
Sometimes the affirmation writes itself.
Stay Classy
Back to the BBQ, Enjoy the holiday Everyone.
I have zero shares, I’m simply writing this review for entertainment purposes.