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Akoustis dilution -3

00:23 20-Jan-23

Akoustis has priced up to 12.54M shares at $2.75.  This is more than I was hoping for and represents 19 to 23% dilution.  Although I expect Akoustis will be able to put the $28M to 32M in proceeds to very good use, my guess is that in the short term, AKTS will trade between the placement price and $3, which would be a 20% drop from prior trading levels.  Prices as low as the $2.50 strike are certainly possible, though.

The next quarterly report is due around the end of the month.  This should cap financing before the company's application for stimulus funds, and I doubt management will be willing to provide metrics on expanded manufacturing before that, but it is possible.  That and guidance based on the new orders should improve the stock price over the short to medium term.  Consequently, I am leaving my ranking on this event unchanged even though the dilution and immediate price movement alone might normally merit up to a -5.

Akoustis has followed up by announcing its first high-volume 5G mobile filter order on the design win from the end of December.  The mobile chipset reference design in which these filters will be used is expected to be introduced in the first half of this year.

The prospectus for the share offering below is now available and I see two new relevant details:

1. The company discloses that revenue for the report due toward the end of this month should be $5.9M, which misses estimates by $0.1M.
2. Directors and officers have indicated an intent to participate in the offering through the purchase of approximately $1.1M shares.

I see #1 as trivial.  However, if shares were to price around the current $3 mark and Akoustis limits dilution to the shares already outstanding but not floated, #2 would amount to about an eighth of the total dilution.  Dilution is still bad, but insider buys may help to offset the sentiment along with the fast turn around from design win to new order.  The market has not reacted to any of this so far, and terms of the sale remain paramount.

On 1/18/23 16:21, Esekla wrote:

Akoustis has announced a public share offering without setting any terms.  The company only has about 2.7M unfloated shares, which would be about 5% dilution.  However, I'd been warning that the GRoDT New Year's rebounds looked vulnerable, and AKTS has traded down as much as 20% to prices below $3 on the news.  I'll update the rank on this note once terms are determined.

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