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Resonant dilution -6

09:17 22-Apr-16


The Resonant capital raise that I wrote about previously is happening and the terms are not good. 

The company plans to raise $6M by selling both stock and warrants.  If the warrants are fully exercised, which could occur any time in the next 3 years at a strike price of $2.86, that would represent just over 27% dilution.  Each warrant comes with 1 share of stock for $2.985.  Assuming just a 10% per year premium that puts the current fair value of RESN at about $1.27. About the only bright spot is that some of the capital is coming from insiders who are buying into the placement, but given the terms, this doesn't mean much. 

The company is also expected to announce earnings at the beginning of next month, and lose 31 cents per share, but these results can't matter as much as the terms of the placement, in my opinion.  Those who understand the mechanics of sales like these will be looking for hard assurance that the company will be able to generate enough revenue to sustain itself within a year, in order to avoid more toxic financing of this sort.  While Resonant's technology does look potentially game changing, and management has indicated the possibility of revenue within that time frame, the indications are that no real assurance on that point is available yet.