Westport, MicroVision and more -4

09:47 14-Jul-17

Westport has priced 16.7M shares at $1.50 each, which represents about 15% dilution based on the 111M share count referenced in the investor presentation linked below.  Over-allotment could raise the offering to 19.2M shares or 17% dilution.  I find that disappointing, but suspect that shares will still trade above the offering price.

On 07/14/2017 09:25 AM, Esekla wrote:

WPRT shares are halted following two press releases.  One discusses a stock offering; it leaves the terms completely unspecified, but the associated investor presentation says the company is seeking $25M.  The other provides 2Q17 revenue guidance that is slightly above analyst estimates and projects that the company with be EBIDTA-positive in early 2018.  That, combined with the company's $87M cash balance at the end of June, makes the decision to dilute all the more disappointing, but as always, the impact will depend on the pricing.  I suspect that this is linked to of the renegotiation of the company's debt (repayment is cited as one of the purposes).  If Westport pays off the $49M of debt due in 2017, it will have just $30M remaining with no significant maturities until 2021.  More than half of that is Cartesian's $17.5M of debt convertible at $2.17 per share.  That may act as a price cap on WPRT, but the 11% rebate rate argues otherwise.  Thus, I think that the 16% pre-market drop to $1.50 and change may be a slight overreaction.  We'll see once the offering is priced.

On the other end of the dilution spectrum, MVIS has been trading strongly since the ATM termination, and the rebate rate has been swelling over 50% in recent days, and then ebbing again.  A recent article indicates that Apple is working on a 3D laser sensing solution for its iPhones. As usual, details are scarce and I'd be cautious about inferring too much.  Note that such an arrangement carries danger as well as opportunity, given Apple's business practices with suppliers; see the notes and comments on GT Advanced here.  Nonetheless, now that MicroVision has successfully supplied the Voga V, it is a plausible provider of hardware for an Apple phone with some augmented reality features.  The rebate rate and trading indicates a high likelihood of a significant short squeeze should there be an announcement.

As long as were talking AR/VR tie-ups, a mention for eMagin is in order.  The Occulus Rift is essentially a flop, due to pricing, tethering and the incumbent status of other smartphone-based alternatives with more open architectures.  In response, Facebook is planning a stand-alone headset with integrated screens, and eMagin would be a primary contender.  It's current rebate rate is just under 2%.

Finally, I've been surprised at how well INTC shares have been holding up.  I'll give more detail later, as I want to get this out before market open, but I would not be inclined to chase them above $34 right now.