Nano Dimension (NASDAQ:NNDM), an Israeli biotech firm with just $400,000 in revenue in its last quarter, has raised over $1.4 billion in the past six months. The company seems to be in the business of raising cash through equity offerings. Now the market has caught on and its cash-raising business could be over for NNDM stock.
For example, Nano stock rose risen 450% in the past six months while the company has had eight capital raises at successively higher prices. The most recent one, for $500 million before expenses, was at $12.80 per American Depository Share (ADS) on Feb. 15.
As a result, by my calculations, the company has raised $1,489 million before expenses, and likely about $1.415 billion after costs. As it had $37 million in cash as of Sept. 30, the cash balance, before ongoing losses in the company, is likely about $1.452 billion.
Click to EnlargeSource: Mark R. Hake, CFA
You can see this capital raise history in the table I have put together.
At the same, I now estimate that Nano Dimension has about 244.41 million shares outstanding. That puts its market capitalization at $2.371 billion.
Therefore, the company has raised so much money, $1.489 billion, that its remaining cash balance, $1.452 billion, represents 61% of its $2.371 billion market value.
Another way to put this is that cash now equals $5.94 per share (i.e., $1.452 billion divided by 244.44 million shares). NNDM shares are priced currently at $8.77.
Now the market has decided to put an end to this. They have caught on the game that Nano Dimension was playing. You can’t keep diluting shareholders ad infinitum. It only works if the stock keeps rising consistently. If you raise capital after the price has peaked. the dilution from extra shares, with nothing supporting them in terms of fundamental operations, will push NNDM stock down.
For example, NNDM stock seems to have peaked at $16.72 on Feb. 9. Since then, as of March 2, NNDM stock has fallen 45%.
The market also realizes that the company is out to make a large acquisition or a series of acquisitions. Therefore, its existing revenue and earnings don’t really matter.
Since investors don’t like uncertainty, NNDM stock has started to drift down. In addition, there is always the possibility of overpaying for an acquisition.
Nano Dimension seems to recognize this issue as well. Management was interviewed on Feb. 3 in an Israeli magazine called Globes discussing the difficulties it is having finding a suitable acquisition.
Management blamed SPACs (special purpose acquisition corps) as having bid up the prices for quality tech companies in their space. Nevertheless, Nano hired two investment banking firms to help it find acquisitions that will “synergistically support” the company’s growth plans.
I suspect that NNDM stock will continue to float down closer to its $5.94 cash per share level. That is because until the cash is put to work, either with internal research and development or an external acquisition, it is the major asset of the company.
So, in a weird sort of twist, NNDM has become a de facto SPAC, with only the shell of an underlying tech business. This is because cash is its major asset. This is ironic since the company has railed against the SPAC phenomenon that has raised the prices of potential mergers or acquisitions.
Obviously, it is not exactly a blank check company itself, mainly because the company does not have to return the cash it raised within 24 months like SPACs do. In fact, it might even be better than a SPAC since management is made of technical experts in their circuit board manufacturing business arena.
Normally SPACs are run by non-technical management who actually contribute little to the merged company other than identifying a merger target. In this case, NNDM stock, as a de facto SPAC, will have an underlying business that can theoretically provide synergies with an acquisition.
For that reason alone, the stock might end up having a small premium over its $5.94 SPAC price. Therefore, assuming a 10% premium, NNDM might end up trading at $6.60 or so until it makes an acquisition.
However, that implies that the stock has further to fall. Wait for it to drop another $3 or so before thinking about buying NNDM stock.
On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
The post The Jig Appears to Be Up for Nano Dimension appeared first on InvestorPlace.
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