Troubled publisher Majesco has been offered a cash injection of USD 5 million to continue trading, but the offer comes at a high price - 3.3 million shares in stocks.
According to theStreet.com, Trinad Advisors - which already owns 9 percent of Majesco - has offered to invest the money in exchange for the substantial shares in stocks. It has been suggested that Trinad have hinted at more aggressive action should Majesco's board of directors choose to decline the offer.
In a letter to the board at the beginning of the week, Trinad Advisors' managing member Robert Ellin stated: "We have long been proponents of, and believers in, the significant potential of the company. We believe that the company now faces danger to its continued existence and prosperity. ... The time has clearly come for the board to take decisive and aggressive action to begin to deal with the enormity of problems that now face the company."
Majesco recently posted its third quarter financial results, which showed massive shortfalls and crippling operating losses. Lines of credit have been drastically reduced, and company president Jesse Sutton stated that the firm will need to re-evaluate its entire business model.
A note posted by Wedbush Morgan Securities stated: "The company's July 31 cash position of $10 million appears insufficient to fund ongoing operations through the financial year for 2006."
"Because of the company's liquidity crisis, we consider bankruptcy risk a real one. We believe that a capital infusion would be positive in that it would provide the company more resources to ease its liquidity. However, given the significant challenges faced by the company we believe that it may still need additional financing."
Majesco announced that executives were negotiating for an increase in the credit lines following the Q3 results. It would appear that those negotiations have not been a success, which means that, in spite of the substantial shares of stock requested, the investment offer from Trinad may well be the best solution for the troubled firm at this stage.