Celestial, no more in heaven

The eventual has happened. The bond holder is calling for redemption and the group issued the statement that they are unlikely to be able to meet the obligation.

It is quite unfortunate that a company with a well known and growing brand, ended up in this kind of situation. The problem started when a small company is trying to expand rapidly and borrow aggressively. The convertible bond was issued with early redemption option, when people don't expect the bond holder would ever call for early redemption. You never know, when crisis strike.

This highlight the risk with small cap stock. The company is small, so you can afford to grow quickly. But, at the same time, the more leverage you have, it is increase the risk. Compare a company with little borrow, you know which one is more stable. Therefore, never bet big on one single small cap. You never know what would happen next.

There could be three outcomes

i) a white knight is willing to acquire shares in the company and the proceed can be used to pay the bond holder
ii) the bond holder is willing to receive the share in the company
iii) the company has to wind up

i & ii should be more likely. But that would dilute the existing shareholder's stake. iii is the unthinkable, you can kiss goodbye to your share.