The investment group said that following previous announcements regarding a renegotiation of its US$6mln simple agreement for future equity (SAFE), Factom had not yet secured further funding.
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FFWD said it had become clear that its SAFE is seen by investors as an impediment to further investment in Factom, despite continued interest from multiple parties in the event that it can be removed.
In light of this, the company said it had made a proposal to Factom that will see the SAFE converted into an alternative instrument which may not be perceived as detrimental to the capital structure of the investee firm.
The company added that Factom is actively involved in negotiations with two industry parties but has notified shareholders that at the end of March 2020, without any additional support or funding, it will be forced to enter discussions with creditors about the distribution of its assets.
At this point, FFWD said the SAFE will become a debt of US$6mln and the company will be the largest creditor.
The company said it has held preliminary discussions with management regarding a potential restructuring of Factom and its creditors, but any deal requires fresh investment in Factom by existing and new investors, adding that it has also indicated that as part of a syndicate it may provide further funding to Factom but will not lead the fundraise on its own.
“In any scenario, based on the proposals FastForward is aware of, it is highly likely that there will be a very significant impairment to the value of the company’s investment in Factom. The impact on the carrying value will depend on the result of discussions as part of any fundraise. At the very least it is the Directors’ belief that any realization of the investment in its entirety will be delayed for the foreseeable future”, FastForward said.
“The current global financial markets uncertainty caused by the [coronavirus] outbreak have severely compounded the difficulties in any fundraise but FastForward remains committed to assisting the board of Factom wherever it can or to otherwise take what action it considers necessary to protect its position. Further updates will be provided as the situation evolves over the coming weeks”, it added.
“Factom has reached a critical juncture in its fundraising efforts where it has become clear that without action by FastForward to remove the impediment to investment created by the continued presence of the SAFE note, funding will not be forthcoming. These proposals are designed to remove this barrier whilst enabling FastForward to continue to benefit from the future development of Factom”, said FastForward director Ed McDermott.
“It is disappointing that this will result in a book loss for FastForward, but we believe that this may, to a degree, have already been costed into our share price which continues to trade at a significant discount to net asset value and that this approach is necessary to retain some value in our investment in Factom. We will make further announcements as soon as practicable”, he added.
Shares in FastForward were 3.8% lower at 5.1p in late-afternoon trading on Thursday.