November 30, 2017
Making the Deal – Yorkville Advisors LLC
When deals for multi-millions are made, ones where a company like Yorkville Advisors, a private investment firm that puts money into public companies, usually takes a bit of time and a lot of expertise. Research is done, due diligence from both sides becomes necessary, and so much more before names are signed on a dotted line and finances made available, usually for investing by the company who needs the funds.
Yorkville Advisors Insight
Looking at a recent deal with a binding term sheet signed the end of 2016, Yorkville’s global arm invested $3 million in the company stock of EZTD Inc. That meant EZTD would then have $3 million to invest in other deals. The initial installment payment of $800K was made upon signing, the remaining $2.2 million would come once EZTD met certain conditions.
What kind of conditions might be asked in such a deal? Well, in this case, Yorkville had some concerns about how leadership had operated in the past and wanted that problem cleared up before completing the monetary transfer to buy the common shares. First, the Share Purchase Agreement would need to be signed and the shares transferred (in total, 500,000 shares of common stock), but there was also the matter of setting some accounts straight.
The head of EZTD, Shimon Citron, was required to make many concessions, giving up previous contracts he had for personal gain. Citron continued as CEO of EZTD. He was required to invest $500K of his funds back into the company, and also continued as manager/CEO of various subsidiaries of the company.
But there were other conditions too, ones that are common in such large transactions. These included
- 2 seats on the board of directors for the main company and any subsidiaries.
- Convertible debt needed to be transferred to shares of common stock by all those who were debt holders. The shares were given in exchanges at a rate ranging between about $5.75-$7 per share.
- Convertible debt holders were given the right to have an observer at all board of director meetings for the company and any of its subsidiaries. No voting powers for the observer.
- Some directors (including Gustavo Perrotta and Ron Lubash) were required to forfeit credits they were due from the company and subsidiaries. Both would continue as directors through the end of 2017.
- Bylaws of the company were to be amended so there would be greater control over annual accounting.
Why Do They Do It?
The company believes in investing in the future of public companies. For another deal they’ve been working with Q BioMed, they made the investment to help them in their ultimate goal to use funds to create “an effective chemotherapeutic against liver cancer, which currently has very few therapeutic options.” For other companies, it is so they have funds to expand their operations or buy smaller businesses to build faster.
Whatever the reason, Yorkville Advisors is an agent for positive change in what they attempt to accomplish.