Sigma Labs, Inc. (OTCMKTS:SGLB) Drops After Financing Announcement

The new year has not been too kind to Sigma Labs, Inc. (OTCMKTS:SGLB). The ticker has dropped nearly 40% from the price at which it resumed trading into 2014. Yesterday’s session saw SGLB close 4.9% down and stop at $0.11.

The company announced a private placement of common stock on Monday. SGLB issued a total of 43.7 million shares to Rockville Asset Management Ltd., a company based in China, against the sum of $3.5 million in cash. The transaction puts the purchase price of the shares at $0.08 per share. The market’s reaction was more or less natural – SGLB shrunk a little closer to the share price of the offering.

Some investors on discussion hubs voiced their concern about the round of financing but realistically, nothing too dramatic has happened. The filing accompanying the news explains that SGLB will be using the money to expedite the development and launch of its flagship PrintRite system for additive manufacturing quality control.

The 43.7 million shares, while dilutive, will hardly cause a big splash as they constitute dilution of under 10% against SGLB‘s 556 million outstanding common shares. The shares are also restricted so there’s no impending danger of a selloff and considering some of the provisions in the 8-K filing and the statements made by the purchasing party, it looks like Rockville is in for the long haul. Additionally, SGLB practically quadrupled its available cash with this placement and it would certainly benefit from this if it’s to speed PrintRite along in 2014.

Longs are mostly unperturbed and read the current movement as an opportunity to load up more shares as the price slipped. Overall, despite the discount at which the shares are offered, the placement is likely a good thing for the company in the longer term. The restricted nature of the shares gives investors time to assess their situation and react and the fact that the company got a significant amount of hard cash is a positive.

It remains to be seen whether SGLB slips closer to the $0.08 offering price over the next days and whether the company comes up with further news regarding the ongoing testing of their product by major aerospace companies.