Dragni Dragnev

ProGreen Properties Inc. (OTCMKTS:PGEI) Surges On Acquisition News

by Dragni Dragnev March 10, 2016

Yesterday, ProGreen Properties Inc. (OTCMKTS:PGEI, PGEI message board) announced that it has entered into a purchase agreement with an entity named American Residential Fastigheter AB – and the market went crazy.

As per its 8-K, PGEI issued $1.3 million worth of Series B Preferred Stock as compensation for the purchase of a subsidiary company named American Residential Gap LLC. Interestingly enough, the agreement seems to contain no toxic discount provisions – said shares can be turned into PGEI common stock at “a conversion price per share of the weighted average closing prices of the Progreen Common Stock for the 20 trading days immediately prior to the one-year anniversary of the Effective Date (the “Conversion Price”) on which date the Series B Preferred Stock shall first become convertible”.

The agreement came with an anti-dilution provision, which makes it impossible for the new owners of the Series B shares to turn them into PGEI common stock before march 2017 – which is certainly good news for investors. But was the news good enough to warrant a 63.42% jump in PGEI's price per share?

That is up to each individual investor to decide, however it bears repeating that although the terms of the purchase agreement seem agreeable enough, there are no actual details about the acquisition in the filing itself.

What if American Residential Gap LLC has nothing significant to its name? Can it contribute to PGEI's overall development and profitability?

Currently, investors have no way of obtaining a reliable answer to either of those questions – which means that we don't really know whether the acquisition was actually a good thing or not.

This, as well as the fact that PGEI still has about half a million worth of toxic convertible debt, means that investors really should think twice before jumping on the PGEI hype train.

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