A New Financing Agreement Gives International Stem Cell Corp (OTCMKTS:ISCO) a Push
Back in July, International Stem Cell Corp (OTCMKTS:ISCO) announced that they have signed a financing deal with an entity called Roth Capital Partners LLC, according to which they are going to sell some investment units for total gross proceeds of $3 million. Fresh funding, the management team said, was supposed to help them accelerate the research and development process and give their balance sheet a bit of a makeover.
As we wrote back then, however, investors were unimpressed. ISCO took a plunge immediately after the press release went online and managed to incinerate 40% of its value in a single session.
The problem lied with the terms of the contract. According to the documents, the investment units that Roth Capital received consist of one common share as well as some warrants. Back then ISCO‘s stock was hovering around $0.25 per share and yet, the units were sold at $0.15 each, which, you would agree, is quite a discount. No wonder, then, that the shareholders were grumpy.
Yesterday, ISCO announced another financing deal, but this time, the response was quite different. In just six and a half hours of trading, the price managed to climb by no less than 23%, while racking up a dollar volume of more than $680 thousand. So, what is the reason for the positive reaction?
Well, the deal itself is quite a bit different from the one we saw back in the summer. This time, the proceeds coming from the contract will amount to $10.25 million over the next three years. The investor is called Lincoln Park Capital Fund LLC (LPC) and this time there are no warrants involved. LPC will buy only common shares over the next thirty-six months while the purchase price will be based on a formula which takes into account the ticker’s market performance.
There’s no upper limit on the price, ISCO can sell shares whenever they need some additional proceeds, and they can terminate the contract at any time without additional cost or obligations. They will only have problems if the stock drops below $0.05 per share which, at the moment, seems unlikely.
The issuance of new stock is bound to cause some dilution in the future, but that said, there are also quite a few plus points to the financing agreement. The proceeds coming from it should give ISCO the comfort having one less thing to worry about and they should give the all-important research and development activities a push. Even so, there are still some risks worth considering.
ISCO has never really been a short term play, but it would appear that there has been quite a lot of excitement around the ticker recently. As we mentioned in our previous article, Quality Stocks are engaged with a prolonged promotional campaign and some newsletters have also had a go at touting the stock. Optimistic Seeking Alpha articles are appearing every now and then and all this hype is bringing in more and more day traders who just want to make a quick and easy profit. This, in turn, could result in an unpredictable performance.
Of course, there are also the risks usually associated with investing in a research and development biotechnology company. It’s clear that the sales of skincare products aren’t going quite according to plan, which means that if the stock is to see some continuous growth, ISCO‘s boffins will need to get the stem cell technology out on the market sooner, rather than later.
Hopefully, they will succeed, but until they do, you should carefully weigh the risks of a potential investment.
Dewmar International BMC Inc (OTCMKTS:DEWM) is another ticker that registered a dollar volume in excess of $680 thousand during yesterday’s session. DEWM‘s price went up by a mind-bending 350% after the company CEO announced some positive developments. In terms of interest, however, few companies beat Makism 3D Corp (OTCBB:MDDD) who managed to register a whopping 47% increase in price while shifting nearly $9.7 million worth of shares.
