It is Christmas at last and despite stormy weather and lack of snow, I appreciate the days of with my family. I hope you find time for that as well.
During December, four of the companies in my portfolio asked for more money. The companies are CybAero, Cantargia, Recyctec and Dignitana. In this post, I will follow up on the issues and say a few words on the perspectives.
A theme for many companies lately has been partly successful issues. A1M Pharma is a sad winner in this sport, but a number of companies have experienced, at best, lukewarm support when it comes to investing more money. Lately A1M missed a warrant series, as the share price never went close to the issue price. The company missed app. 40 SEK. Generally, it is hard to find investors with enough enthusiasm to pay 15 SEK using warrants when the share price is 11 or 12 SEK.
CybAero – preferential rights issue
The premium for participating in issues plays a crucial role. This brings us to the first issue, that of CybAero. The share barely kept above the issue price before the issue – and fell below right after.
Some Months ago the company received a lifebelt through an agreement with Dubai based Brackenor. The company used to be a single product company with an expensive product with some very, very long sales cycles. This, combined with a very high burn rate and an order in China, which has never been accepted by the customer and paid for, made things extremely difficult for the CybAero. The share price consequently has crash completely.
The issue took place during November and December. The issue price per unit was 3.75 SEK and a unit was one share and one warrant, which entitles the holder to buy one share at 5.50 SEK in September 2018. The outcome was a subscription rate of 73.8 %. It gives the company 34.2 MSEK – or 21.6 MSEK after costs. The current burn rate is 4.5 MSEK per month so this buys CybAero 4-5 extra months to generate orders. The issue and the money from Brackenor secures funding for 2018.
Currently the share price is 3.55 SEK, which is 0.20 SEK below the issue price. I subscribed shares in the issue, but tend to think this more of a lottery ticket than an investment. I hope I prove wrong. If the shares returns to the level of 2014, I am a wealthy man – by the then the share price was app. 150 SEK (when adjusting for reverse splits).
Cantargia – two issues in one
Contrary to CybAero, Cantargia is highly able to attract investors. The company made a huge double issue, both private and a preferential rights issue, of 232 MSEK. The private issues amounted to 101 MSEK and the preferential rights issue 131 MSEK. Current investors subscribed for 75.1 %, new investors for 2 % and guarantors covered the remaining 22.9 % or 30 MSEK in the preferential rights issue.
This amount of money will secure Cantargia enough funds until 2020 and enables the company to continue the Phase II studies of their prime candidate CAN04 on three parallel tracks. Additional there will be funds to make the initial tests on the next candidate currently referred to as CANxx.
Currently the share price balances slightly below the issue price of 6.8 SEK. Investors wanting to buy can gain a little extra by buying the Cantargia BTA (which is the paid but not formally registered share). The price is 0.15 to 0.30 SEK lower than the share price. Probably because some investors do not know or because some of the guarantors might need to retrieve their money.
Personally, I subscribed fully, and I think the only thing investors have to do about this share is just wait.
Recyctec – failed private issue
Recyctec is in trouble, it seems. For some time it has resided on the Observation List at Aktietorget due to lack of funds. By the end of November the company announced a private placement of 5 MSEK that should enable the company to make it through Q1 and buy the company time to sell (and lease back) the buildings at their site in Jönköping. This manoeuvre should secure funds for 2018.
Despite the company’s attempts to find investors for the private placement, they have only managed to secure less than half of the 5 MSEK – 2.1 MSEK. On December 15th, the company then announced that it only had sufficient funds until end of January and that currently there is not enough funds for the next 12 months and that the company will need additional money.
A new CEO took over in Recyctec this summer and in many respects, the company are in the midst of a turn around. There have been notable improvements in sales, marketing, production, and investor communication. Most importantly, it seems that sales finally has begun to rise. If the financial problems have occurred six months later it would probably have been easier to find investors for the private placement.
There is no doubt that a private placement where the company only managed to secure 42 % puts serious pressure on the company. Furthermore as the share price have dropped below issue price. Compared to Cantargia or A1M Pharma the market cap of 11.4 MSEK seem almost negligible. The value of buildings and land in the latest report were 22.8 MSEK, which is exactly twice the marked cap.
I hope that the next weeks will provide a solution so Recyctec can focus on making a profitable business. There is so much good to say about recycling a substance as glycol and of course, I would like my investment to be profitable.
Dignitana – still waiting for the outcome
Dignitana ended their issue on December 20th. Judged by the difference in share price and issue price investors will probably subscribe all the shares – and some more. By December 22th, the share price was 3.57 SEK whereas the subscription price is 2.1 SEK. If the share price holds, the premium for subscribing is very high, especially compared to the last long line of issues. Judged by the price of the BTAs (paid but not registered shares) the price will go down, though. The price on Friday was 3.05 SEK – 0.52 SEK or 15 % lower than the ordinary share price.
There has been no communication as to the outcome of the issue yet. It will probably follow in the first week of January. Personally, I made a misjudgement of the share price movements around this issue – which is a story I might tell in a later post. The conclusion, in short, is that I could have been more well of than I am now. When I am finished kicking myself, I might find time to tell what I did wrong.
With only one week to New Year, it will soon be time to make an update on the performance of the portfolio in 2017. Until then I would which you all a Merry Christmas and a happy New Year!