Superconductor Technologies update
27th July 2018 |
On 24 July the company announced two corporate actions which have had a considerable effect on the price of the share.
It both announced a reverse split and a new equity offering. Reverse splits are also referred to as consolidations, which on this occasion means that ten of the original shares were exchanged for one new share. That means that the price has seen the decimal place move one place to the left so that it is now quoted in dollars rather than cents.
The reason it completed this reverse split was because it simultaneously also announced an additional capital raise of 2.5 million new shares issued at $3.50. The company hopes to raise an additional $9 million from these sales, which amounted to about half the market cap before the announcement.
The share collapsed on this news because it is dilutive to existing shareholders and the sale price was well below the existing price. As an incentive, each new share will be issued with an imbedded five-year warrant, which will allow for one additional share to be purchased at $3.50. However, the incentive, while beneficial in a bullish environment, is in this case a reflection of the dilution current shareholders have experienced.
Here is a section from the press release:
The Company intends to use the net proceeds of the offering for working capital and general corporate purposes, which may include acquiring complementary products, technologies or businesses.
Superconductor Technologies has a position in the emerging fusion technology sector but, as this sector heats up, competition for production of superconducting wire is likely to intensify. Putting the company in a position to compete is the reason behind the capital raise but the swiftness of the decline has been disruptive to investor sentiment.
For my part, Superconductor Technologies is one of the few ways to invest in fusion technology. I have a high degree of confidence we are going to see an accelerating pace of development in the sector and that our resolve to hold will be vindicated.
Please note that as a result of these actions the displayed share price on the portfolio has been altered. We are aware of the issue and we are working on fixing it.
All the best,
Eoin Treacy
Investment Director, Frontier Tech Investor
