On Friday, MagIndustries Corp. (“MAG”) informed that TSC Capital Ltd. (“TSC) decided to terminate its due diligence investigations with respect to the company. TSC will not participate in the potential offering of units by MagIndustries.
Provided the diligence had been successful, TSC would have agreed to purchase more than 222M units issued by the company. This could have brought about $185M in cash for MAG. Now, these funds are lost. What is worse, the company does need the money urgently.
No doubt, the news had a devastating effect on the shares’ performance. On the day when it was released, MAA slumped over 32% on the TSE. The plunge was additionally reinforced by a record turnover of more than 25M shares (!) traded. The stock even drowned to a new year-low of $0.185.
Still, there is hope that MagIndustires will recover from the fall. If it manages to find a new, reliable partner instead of TSC, things might quickly turn for the better. Besides, the stock is obviously not ready to give up without a fight. Yesterday, it gained over 5% on the TSE on a huge trading volume. MAA has maybe begun its rebound from the bottom.
This might have something to do with the announced on Tuesday change in the company’s board of directors. It is at least a sign that MAG is making efforts to change something about its unpleasant present condition.
It is not clear, however, if the rebound will continue in the coming days. During the last session, the Doji of investor indecision and uncertainty was formed on the chart.
It looks like investors do not have enough confidence in the company at present. MagIndustires has no production. Nobody is sure how it will secure all funds needed to build a potassium chloride production plant at Mengo potash property. Moreover, MAG has almost $30M in long-term debt that deserves attention too. In addition, it can no longer rely on the anticipated financial cash-flow from TSC Capital.
