Heliospectra announced a preferential rights issue in October. This came as no surprise since the Q2 report showed that cash was running low. Users on Twitter and elsewhere following Heliospectra also knew why: Heliospectra is very active promoting their lighting systems at messes, conferences, and investor meetings. Being active costs, but it will probably pay off.
The prospect came out this week with a subscription period until December 2th. Shareholders have preferential rights and can subscribe for 3 new shares for 4 current shares. The issue is fully guaranteed with a possible 20 MSEK oversubscription. If investors fully subscribe the company will have 111 MSEK for the continued expansion. According to the CEO this would be sufficient for break even. The issue price is 6.50 SEK.
Where does Heliospectra stand?
Most important: Sales are rising. From 2014 to 2015 it rose 340 % (from a very low level). After Q3 the turnover is almost 20 % above full year 2015. If Q4 sales is at same level as Q3 the turnover will double in 2016 compared to 2015. Turnover was 16.2 MSEK and profit was -30.3 MSEK during the first nine months of 2016.
The idea of the company is to sell lighting systems. This is lamps, sensors, and software to optimize plant growth. At present the company have four lamp-series. Along the lamps, the company has sensors and software that changes the spectrum of the light during the growth circle or during the day in order to optimize plant growth.
Heliospectra has a salesforce themselves and uses to some extent minor distributors. The company’s own salesforce focus on larger customer segments. These are greenhouse growers in Europe and growers of medical plants in US. Smaller customers can buy directly via the web-page. The geographical markets the company focuses on is North America, Middle East, and Europe. In Europe focus are on UK, Poland, Germany, Nederland, and Scandinavia.
The main research facilities are located in Sweden. Assembly takes place in Sweden and US by external partners.
In my EGS-model this issue is intended to bring Heliospectra the final step towards the upper right corner (market acceptance – break even), from the actual state: market presence-some sales.
Share price and subscription
This issue differs from most other issues, since the share price did not fall as heavily as it usually does. The day before the issue the share price was 8.1 SEK, and fell after the announcement. For a few days it closed below issue price. Then it recovered and on November 9th it even passed the pre-issue price – and closed at 9.3 SEK on November 18th. I cannot say exactly what made the share go up, but one reason was no doubt the elections in USA, where many states had referendums on legalisation of cannabis – and did vote in favour. Most notably California with its many inhabitants.
Heliospectra is well-positioned towards the cannabis growers market. Most of the growers are newly established and they invest in new equipment and will go for the energy savings and higher output Heliospectra’s lighting systems can give. With reference customers in other states, Heliospectra has advantage on the up-coming market in California and other states where the ban is lifted.
The high share price makes the premium for subscribing large. With the present price you get 43 % on top of the subscription price. This of course will call out investors to ask for the shares in the oversubscription. Compared to the recent issue in CybAero where the premium was very low, only 2-3 % of the shares were subscribed without rights – and the issue in total was not fully subscribed. The Heliospectra issue certainly will, if the premium stays as high as it is now.
Personally, I will subscribe both with and without rights. Usually investors get only a minor number of additional shares if the issue is oversubscribed. If so investors get additional shares relative to their subscription with rights. In worst case the current shareowners will take all the shares.