Rare is the company able to capitalize on the market’s over-exuberance. Today’s exhibit is ASPN, announcing plans to offer $225M in stock (which at today’s price would be around 25M shares) along with $150M in convertible notes (at least another 15M diluted shares) which would basically double the company’s fully diluted 40M share count. All in one fell swoop. And the kicker? It’s still not enough for the $750M they are expecting to need (the CAPEX on their new facility has only just begun). This go-around, the market doesn’t appear to even care that those astute investors over at Koch Industries are willing yet again to take down another $100M chunk of the stock offering. You will remember that Kock Industries invested $75M in stock on its way up (around $22 a share) and then an additional $150M on its way down (around $30 a share). If you loved it at $30, you gotta really love it at $10, right?
Had they proposed and done this offering back when I first mentioned this name when the stock was in the $50’s, the dilution needless to say would have been much less. They knew back then that they were going to need gobs more money, so why wait? In the throes of a bull market for anything EV-related I suppose it was hard to look at your own company objectively and start believing the hype. Looking back, no matter how crappy NNDM may or will ever be, when their stock went on a run from pennies to $18 a share on nothing more than ARK-inspired frenzied buying, the company’s management was at least savvy enough to recognize what was happening and do one offering after another until the beast was satisfied, and now the management need never worry about doing another financing or, heck, their own job security ever again.
That is not the case with the folks at ASPN. Earlier this month the company basically telegraphed this offering when they announced that 2022 was actually going to be quite a bit better than previously expected from a revenue standpoint (PyroThin revenues are now expected to be in the $52M to $62M range from maybe $18M previously) though much worse from a losing money perspective (anticipated net loss is now around $82M, up from $$69M). Since they only had $200M in the bank and were planning to spend at least $250M this year, this offering was in the cards. You see, as I had mentioned, PyroThin is currently a hugely negative gross margin business, to the tune of around negative 50%. So if the company is expecting to do around $58M in PyroThin revenues, up from the expected $18M, then that incremental $40M in revenues would lead to incremental expected net losses in the $20M range. Their guidance, however, is for only a $13M increase in net losses, so perhaps they are making some progress after all.
At the end of Q1 the company had around $205M in cash sitting on their balance sheet. Net losses for the last 3 quarters are expected to be in the $60M range; or on an adjusted EBITDA basis maybe another $45M. So they should end the year with $150M without doing any CAPEX. But they are expecting to do CAPEX, somewhere in the $250M to $300M range. Assuming they can sell $225M in stock and $150M in convertible notes, they should be able to exit the year, once again, with around $200M or so in cash on the books. Of course, when they do, they will have $250M in convertible debt outstanding and over 65M shares of common stock. Interest payments will be close to $20M per year and they will be losing $60M a year on an adjusted EBITDA basis.
This trip to the well will surely not be their last, and sadly, these terms may never get much better.