EnteroMedics, Inc. (NASDAQ:ETRM) Gains After Reporting the First Sales

[[tagnumber 0]]Shares of EnteroMedics, Inc. (NASDAQ:ETRM) gained over two consecutive trading sessions this week and today the stock could break above the 10–day moving average. If ETRM can recover from the huge plunge earlier this month is another question though as the company is still struggling even though its started selling its first approved vBloc Therapy device for the treatment of obesity in the second quarter.[[tagnumber 1]] [[tagnumber 0]][[tagnumber 3]][[tagnumber 1]] [[tagnumber 0]]Yesterday, ETRM closed the market with an 8.72% gain at $0.183 for a share. The trading volume was above the average and the chart took a bullish position for today. Technical indicators give bullish signals as well and the stock price could go over the moving averages later this week. However, longer–term the stock could not grow as after a series of security offerings this year shareholders will expect more dilution.[[tagnumber 1]] [[tagnumber 0]]This week, ETRM said it had regained comp[[tagnumber 8]]liance with the NASDAQ listing requirement in regard of the minimum value of listed securities. Yet, ETRM is still not in compliance with the $1 minimum bid price requirement which the management intends to solve by conducting a reverse stock split.[[tagnumber 1]] [[tagnumber 0]]That has never been a solution of the problem, especially in the case of ETRM which has now a huge number of outstanding convertible notes and warrants. In July, ETRM issued 32 million units for gross proceeds of $16 million, each unit consisting of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $0.60.[[tagnumber 1]] [[tagnumber 0]]Though the exercise price looked somewhat higher than the market price at that time, it can be lowered if certain events occur, like issuance of securities convertible into common shares at a lower price, or a reverse stock split. While the reverse stock split is yet to be approved by the Board, the first condition is already a fact.[[tagnumber 1]] [[tagnumber 0]]On November 9, the first of the three Senior Convertibles Notes Offerings announced already in the third quarter report took place. The 7% notes issued are due in 2017, the aggregate principal amount is $1.5 million and the conversion price is $0.29, while the offering also contained warrants to purchase shares of common stock at $0.31 per share. According to the Q3 report, after the three offerings, holders of the warrants will have the right to purchase over 29 million common shares of ETRM, which is nearly one–third of the currently outstanding shares.[[tagnumber 1]] [[tagnumber 16]] [[tagnumber 1]]