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Nanoco – as warned, discounted placing ahoy!

By Steve Moore | Friday 6 October 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.

I noted in an update on Nanoco (NANO) last month that a “Commercial Supply and License Agreement” saw the shares bouncing a bit, but the key question remained when’s an attempted fundraising? (discounted, natch). Well, the company has now been “pleased to announce” a placing result and researcher Edison has updated…

The initial fundraising announcement saw CEO Michael Edelman state that “the board appreciates the patience of shareholders and has worked hard to secure the terms of this important fundraising, which we believe to be in the best interests of the company and its shareholders as a whole”. With also “pleased to announce”, a good deal secured then?

There was a further announcement following the “Commercial Supply and License Agreement” before the placing – this that the company’s technology would be featured at Touch Taiwan 2017, “a leading show for the world's display industry… an estimated 30,000 visitors and more than 2,000 conference participants”, with a conference presentation from the company’s Senior VP of Global Sales addressing “the growing demand from manufacturers and consumers for quantum dots as a method of achieving wider color gamut and enhanced picture quality in the next generation of displays”.

That puffery helped the shares retain a level of circa 29p – though that comparing to approaching 150p less than three years ago and indeed above 45p at the commencement of 2017. No wonder “the board appreciates the patience of shareholders”! And so the “pleased to announce” placing result…

“the company has successfully placed… new ordinary shares at a price of 18 pence per share to institutional investors”. You what? 18p! A 35% discount to the prior close and, with 47,655,821 new shares to be issued, representing a 20% increase in the issued share capital. What about those suckered in to investing before, on the back of the ‘news flow’ in the prior month?

The share price has currently only responded down to 27p but the new shares are as yet to be admitted to trading – this with the fundraising conditional, including on General Meeting approval. The company though warns “if the resolutions are not passed by shareholders at the General Meeting and the fundraising does not proceed, the company will need to seek alternative sources of funding but, given the current stage of the company's development, this outcome is unlikely to be favourable to shareholders”.

It adds “fundraising to fund the company beyond July 2019”, with Edison stating “Nanoco should have enough cash to last beyond July 2019, even in the absence of substantial volume orders”. However, the track record doesn’t inspire confidence – as suggested by the company reckoning it has had to ‘work hard’ to secure even these latest fundraising terms!

Despite the dilution, Michael Edelman is “delighted we are set to secure the funding” - though I bet he is as otherwise it was cash crunch ahoy again. The stance remains sell.

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