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Resonant dilution and more ABB -5
09:58 26-Sep-17
There is still plenty of reason to think that Resonant will grow as I've hoped it will, both because of carrier aggregation and all the work that is being done now to build out narrow band IoT. So yes, I can see an argument for continuing to hold, for those who had already accepted the risks. I just don't like companies selling warrants like this, due to the added dilution and implied price cap (of $4.85) that it creates.So would you hold your RESN stocks if you have any?
Resonant has announced the sale of almost 2 million shares, plus an equal number of warrants at a price of $4.70. Although, I'd suspected that management would have to raise capital again, the terms here are extremely disappointing, as the warrants, which have a $4.85 strike price, effectively double the dilution to almost 27% and implies a fair value around $4.40. Toxic financing like this is part of what removed RESN's sibling stock, SCON from my pick list, and has poisoned the value in many other early stage tech stocks.
Moving on to better news, ABB is partnering with Northvolt on Europe's largest lithium-ion battery factory. Unlike yesterday's news, this is more of a reminder about ABB's prowess in factory automation, than electrification. The factory should have a pilot line running in 2019, and enter mass production in 2020. I'll continue to look for dips in ABB as buying opportunities rather than jumping on the stock right away.