The rights issue will provide cSEK22m in growth capital after factoring in transaction costs and the repayment of the two bridge loans (totalling SEK25m). Non-participating shareholders will experience a dilution effect of 75% derived from the rights issue. Additionally, Coala Life holds the warrants of series T03 with a subscription period in May/June ’24. We estimate a subscription price of SEK 0.06 (current share price SEK0.08 x 70%) with a 90% subscription rate, implying a cSEK12 m cash injection in Q2 ’24. We expect the cash injection from the recent rights issue and the estimated injection from the T03 warrants to extend Coala Life’s cash runway by approximately six months from Jan ‘24. However, it is vital to note uncertainties related to working capital tie-up (due to long payment cycles) and the utilisation rate of factoring solutions to enhance cash conversion.

Coala Life’s coverage was previously under review, but with the recent injection of growth capital, we have resumed our coverage with updated estimates and valuation. The revised estimates consider the cost-saving program, projected to be fully implemented by January 2024, anticipating total cost savings of approximately 30%. Additionally, the updated estimates incorporate the latest developments in patient ramp-up for Remote Patient Monitoring (RPM), where Coala recently announced a substantial agreement, expecting to expand by 2000 new patients during H2. We project that Coala will conclude 2024 with a base of approximately 8,000 patients and an estimated Annual Recurring Revenue (ARR) of cUSD10m.

Following the recent rights issue and the upcoming subscription of the T03 warrants, we have adjusted our valuation to consider the estimated dilution and anticipated net proceeds. Moreover, our updated financial estimates have influenced the valuation. Recognising the relatively short cash runway, we have factored in an additional rights issue in H1 2024, amounting to approximately SEK40m, implying an increase of 800m shares. However, we recognise a directed share issue as a potential financial solution. The board was granted authorisation to raise the share count by 500m, deviating from the shareholders’ preferential rights, as decided at the EGM in December 2023. Our new Base Case stands at SEK0.12 per share (1.3), the Bull Case at SEK0.71 (4.4), and the Bear Case at SEK0.05 (0.3).