Current Gameplay Drama
Disclaimer: It is hard to be objective here now, but I try
Ongoing Dilution
According to latest SEC filing DEF 14A from 4/6 OS was 52.88M on 2018-03-29. This implies that company has been used the $16M ATM to sell shares and which probably is the source of Deerfield's stake and maybe even of the covered shorts.
Note that on 12/31 OS was 45.94M and on 3/16 46.99M when the 10-K was filed. That is an increase of 5.89M shares already being sold until 3/29. Until then, avg might have been 75c so $4.42M sold. $11.58M left to sell at a lower average.
Assuming a generous 65c for the remaining ATM, we end up with additional 17.82M shares, i.e. 70.70M OS.
Recap:
- 2017-12-31 45.94M (10-K)
- 2018-03-16 46.99M (10-K) +1.05M
- 2018-03-23 50.22M (SC13g, Deerfield 3.239M 6.45%) +3.23M
- 2018-03-29 52.88M (DEF 14A 4/6) - ATM $16M -> $11.58M
- 2018-05-xx 70.70M Speculation - ATM done
Until 3/29 SH endured a known dilution of 12.53% or a retention of 88.86% since 3/23.
Assuming 70.70M OS spec, this will lead to a speculative dilution of 40%% or a retention of just 71% since 3/23.
Listing Compliance & Debt Covenants
It is known that debt covenants require stock to stay listed on a formal exchange, i.e. not the OTC market.
As of now, company is not in compliance with the following NASDAQ GlobalMarket Continuous Listing Standards:
- $10M Equity
- $50M MCAP
- $1 Minimum Stock Price
Further we notice that due to the lack of equity compliance, company will not be given an extension without an appeal.
You will find that in the NASDAQ Rule book, but it has been spelled out lately in NLST's case - similar situation.
See 8-K 3.01 filed 3/9 "Notice of Delisting of..", where company gives two outcomes of this matter
- Downlisting to NASDAQ CapitalMarket
- Appeal
They do not spell out an extension here.
NASDAQ CapitalMarket Continuous Listing Standards:
- $2.5M Equity
- $35M MCAP
- $1 Minimum Stock Price
Further, deadline for MCAP is the 5/23, i.e. MCAP would need to be over the minimum for 10 days before. This implies the MCAP must have been reached on 5/8 the latest and being kept up until 5/22 end of day for the 5/23 deadline.
Now let's see what would be required to gather the required MCAP for each exchange:
OS $50M MCAP $35M MCAP
53M 94c 66c
58M 86c 60c
63M 80c 56c
68M 74c 52c
Summary
It looks like downlisting is a given from here on, if company is not able to show strong positive material news.
The dilution might not even been known by all traders yet.
I hope they do know.
Downlisting itself is surely better than getting unlisted and hence causing the debt to default. However, it will cause a slide in itself, look what happened to NLST.
I have reduced my position in here significantly weeks ago and traded the latest Insurance pop, which was not material enough.
Adding regional insurance plans is good, but it will only cover
a fraction of Arymo - currently being just 'give aways'.
Full nationwide insurance coverage would be required.
EGLT-002 is also just sitting on the shelf w/o a suitor, as stated by CEO in last CC.
Both, national insurance or selling EGLT-002 would be very strong events able to list stock above required MCAP.
Good luck
