Staffing 360 (NASDAQ: STAF) Turns From Wall Street To Main Street For Funding
Staffing 360 still holds the questionable distinction of being the best company with the worst stock. Still trading just pennies above its multi year low, the company continues to generate record revenues and EBITDA- a fancy word for profits if you take away non cash and interest expense.
While the company has bravely plowed forward towards its target of $300 million in revenues, the stock price has been under siege thanks to a series of free trading shares issuances to meet the company's needs to meet its debt obligations in the absence of cash.
However, today should mark a turning point in the company's appetite to issue stock, and it comes in the form of a loan- not from Wall Street- but from Main street.
Today, just prior to the market's open, STAF announced it had obtained at $7.4 million loan from a strategic investor. Click Here to read the full release.
Jackson Investment Group LLC has agreed to loan STAF $7.4 million in a secured debt arrangement. Jackson Investment is owned by Richard Jackson- a highly successful entrepreneur in the staffing industry. Hence, the company has moved from trying to raise money with Wall Street to funding from an industry veteran from Main Street.
The structure of the debt has both positives and negatives for long suffering shareholders. Jackson received 1.65 million shares just for making the loan- that's a negative for shareholders and probably brings the I&O to 11.5 million. Jackson also received 3.15 million warrants at $1.35- which is a slight negative for investors, but with the stock at $.75 it's minor.
Jackson can also convert 1/2 the note at $2- which is a positive for investors. If Jackson every wants to convert into common stock at $2, it will mean the stock is far in excess of $2.
This $7.4 million takes away the default and dilution risk STAF was facing in 2017 as a lot of debt was coming due. STAF has never been in default on any of its debt, but needed about $3 million to pay off maturing debt in 2017. The company can afford the interest, but wasn't in a position to pay off the principal until today.
This is definitely a sweet deal for the Jackson fund, but it's also far better than what STAF has been doing, and it puts Richard Jackson in a place where he cares about the future of STAF. His staffing companies are estimated at $1.5 billion in annual revenue, so he would be a really strong strategic partner to move STAF forward.
STAF still must face the possibility of a NASDAQ delisting if the stock doesn't find its way back over $1 in the next few months. I'm pretty comfortable that will happen- and the NASDAQ listing will remain in place.
I also believe there's a pretty good chance we've seen the bottom, and the next volume surge will take this stock higher for good.
Stand by for further developments. The stage is finally set for progress for shareholders.
Later this week: An update and long term outlook for Live Ventures- our Q4'16 flyer.
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MarketByte LLC was been paid a fee of 10,000 newly issued restricted shares for coverage of Staffing 360 in 2015. The aforementioned shares have become free trading under Rulle 144 and liquidated. An additional 17,500 newly issued restricted shares and $2500 in cash has been paid for extension of coverage in 2016. The 17,500 shares were liquidated neither MarketByte LLC or any of its affiliates owns any shares in Staffing 360.
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