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Rex Bionics – “Funding and strategic review update” – heading for a de-listing?... or worse?

By Steve Moore | Monday 13 March 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Having previously concluded with shares in Rex Bionics (RXB) at circa 70p HERE, 43.5p HERE and 32.5p HERE, that, although a type of business you want to succeed, some way from being able to prove its commerciality and cash burn concerns until it gets there, the shares don’t look to appeal as an investment, I note they currently at 13p and an update including that “the company estimates that it will likely need external funding by the end of April 2017 in order to remain as a going concern”. Uh oh…

Worse is that “despite intensive efforts over recent weeks… while the company had received some indications of funding support, these have been insufficient to cover the minimum requirement”. However, hope is offered in that “the company is in discussions, in partnership with a third party private investment fund manager”.

These involve Rex contributing its operating business to a new company and taking an equity stake, with the fund manager to “contribute sufficient funding… in order to develop the new REX product prototype”.

You what? “new REX product prototype”?

This comes with it also updated that “the level of unit sales in the period are expected to be below the company's previous expectations”, though that “the company believes that the proposed new REX product would build on the advantages of the existing REX device, while significantly reducing costs and improving both aesthetics and the speed and gait of the device”. Hmmm, the current sales performance is though said to be despite the year having seen the company broaden its distribution network and deliver positive clinical data.

It is also stated that “the exact terms of the transaction are still being discussed”, though I’d suggest going-concern desperation does not exactly provide a strong negotiating platform!

As part of the potential deal, some limited funding from the investor for the plc's short-term working capital needs is being discussed. But it is also emphasised that “there can be no guarantee that the current negotiations will lead to the successful conclusion of the transaction” and indeed, if the transaction does proceed, “whether, and for how long, it would be appropriate to maintain the company's admission to trading on AIM”. Sell! Bargepole ahoy.

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