Sivers IMA/Sivers Semiconductors: Good Directed Issue – No Names Mentioned Though
Redeye Research Note 2020/09/24
The size of the offering (SEK 200m) was as expected and makes for a big addition to the company’s total cash of SEK 66m at the end of Q2, i.e. improving the financial position significantly. In our view, the 10% discount was ok, and reasonably in line with what to expect, considering the strong stock performance lately (+269% in just 3 months). We also note that the price was in line with the 30-day VWAP. Thanks to good timing, the dilution was just 4.4%, again demonstrating good capital allocation skills. However, there were no information around the interest (eventual over-subscription) or the participating investors. We hope that some of the names eventually can be dropped. In general, really good names are usually mentioned in the press release. We see a risk that the advisor might have taken the easy way out and filled the book with traders and a few existing institutional owners on top.
The press releases stated that the purpose of the directed share issue is to finance expansion to support the growth in order intake. This wording could be related to both coming orders or delivering on existing contracts. The increased investments will be directed to production capacity, customer support and sales & marketing. We notice speculations about an imminent, major deal with the first Fortune 100 customer. However, we think that would have required a larger offering. We expect another offering of similar size during 2021, and therefore we cannot raise our financials rating at this point.
While we see a risk for short-term selling pressure from the directed issue, we have a positive view of the transaction and the company in the long term. The stock opened at SEK 32 (-6%), slightly above the subscription price of SEK 30.7. We reiterate our base case of SEK 32 per share.