"From what I gather (someone correct me if I am mistaken), they have filed a "base" prospectus for $100,000,000, and filed a supplement for $25,000,000 to be offered as an "at-the-market" (ATM) offering. The $25M is included in the $100M, so the entire offering is for $100M, with $25M being filed as ATM, the remaining $75M will await a future supplement if needed."
This is the way I understand the prospectus as well. It is difficult for me to understand the reasons behind taking this action however. In my opinion the prospectus has nothing to do with their ability to upgrade to a major exchange. They have several more bridges to cross before that is even a remote possibility. The reasons stated in the prospectus for the offering are puzzling as well:
1. Reducing indebtedness: To my knowledge there is no indebtedness.
2. Aquiring another business: Certainly a possibility, but no obvious candidate in sight.
3. Repurchase common stock. Companies normally repurchase their stock when they consider it to be undervalued by the market. I don't understand the logic of selling stock to later repurchase it. Perhaps someone could help me out here.
4. Working capital. This one does make sense. If sales are still sometime in the future they will need funds to operate in the interim.
When fully implemented the 25 million dollar offering will dilute current shareholders by 38.5% at 10.9 cents per share. Mark, Vivek, and several board members are significant shareholders and their holdings will be diluted as well. I'm having a hard time understanding why a line of credit or debt issuance (even at a high interest rate) would not have been a better option to provide interim working capital. This would have avoided the dilution and would seem to have been a better solution for short term financing.
There is the possibility, as others have suggested, that SGLB is expecting a significant surge in it's share price due to upcoming announced contracts or forecasted revenues and would capitalize on the boost in share prices to sell shares. If this were the case however it still would have made more sense to do a line of credit or issue debt so that a positive revenue announcement would have not been affected by share dilution.
The market does not seem to be affected this morning one way or the other by managements actions (which admittedly surprises me). Shareholders as a whole obviously view this offering in a more positive light than I do.
