SciBase resolves on a capital raise of up to 48 MSEK

The raise, consisting of a Rights issue (up to 15 MSEK) and a Directed issue (33 MSEK), lowers the short-term financing risks we had been flagging, securing financing needs until around Q2/2025 when more signs of US revenue growth accelerating could already have emerged. Our initial reaction to the news is positive, and at first impression, we expect the raise to succeed. A substantial number of warrants will also be issued as part of the capital raise. These form a significant claim to the company’s future equity value, affecting the pricing of the company’s stock, which we expect to address in more detail in the near future with an update on our view on the company’s valuation.

Rights issue for up to 15 MSEK and a Directed issue for 33 MSEK

The Rights issue (RI) is directed towards existing shareholders and gives the shareholders the ability to participate per their ownership share. The Directed issue (DI) is directed towards a selected group of new and existing shareholders. The rights issue terms are as follows: All existing shareholders receive one (1) unit right for each share held on the record date of 19 April 2024, meaning 17 April is the last day to trade SciBase shares including the subscription rights. Ten (10) unit rights entitle the holder to subscribe for three (3) units. One (1) unit consists of one (1) new share and five (5) warrants of series TO 2. The subscription period will last from 23 April to 7 May, and the subscription price is set at 0.42 SEK per unit. If fully subscribed, the number of outstanding shares will increase by 36 million, from 120 million to 156 million. Shareholders who do not participate in the RI will experience a dilution of 23%. SciBase has received subscription commitments from existing shareholders and members of the Board of Directors and management of about 16%. 

The Directed issue is conditional upon the approval by the EGM intended to be held on 13 May 2024. As the company needs financing and, at first glance, the terms seem reasonable, we expect approval by the EGM. The number of outstanding shares will increase by 78 million, from 156 million (including RI) to 234 million. At a subscription price of 0.42 SEK, the DI will raise 33 MSEK before costs. The DI entails a dilution for existing shareholders of about 33% (post-RI). The net proceeds from the RI and DI will be used as follows: about 40% is earmarked for financing the commercialization and reimbursement growth in the US, about 20% will be used for financing investments in production and product development, and about 40% will be used for financing working capital and other operating activities.

Up to 569 million warrants issued in conjunction with the capital raise will bring new dynamics to pricing the company’s share

In conjunction with both the RI and DI, warrants of series TO 2 will be distributed free of charge to participants. Each warrant entitles the holder to subscribe for one (1) new share during the period from 3 April 2029 to 17 April 2029. The subscription price for each warrant is set at 0.42 SEK. If the RI is fully subscribed, a maximum of 180 million warrants will be issued, while 389 million warrants will be issued through the DI. This means a total of 569 million new shares can be subscribed for in 2029, raising an additional 239 MSEK for the company. This would increase the number of outstanding shares from 234 million (including RI and DI) to 803 million, which means that the warrants’ claim on SciBase’s equity value is about 71% on the part exceeding 0.42 SEK/share level. This creates a special situation for the pricing of SciBase’s share for the next five years, which we expect to address in a research report in the near future.

We find it positive that the immediate funding risks are solved, giving flexibility to raise additional capital after more signs of US commercial ramp-up has be seen

The capital raise was largely expected, and the question was more about the terms at which additional funding could be secured. In our valuation, we had assumed equity issues of 75 MSEK in 2024 and 2025 at a subscription price of 0.40 SEK. With 34 MSEK of cash at year-end 2023 and net proceeds of 44 MSEK, SciBase’s pro forma cash position is 78 MSEK. Assuming a burn rate of 15 MSEK a quarter, the company’s financing needs would be met until about the second quarter of 2025. The remaining funding gap, to our estimates, is around 100 MSEK during 2025-2027. However, we expect SciBase to have improved its business fundamentals by the time of its next potential capital raise in H1’2025. If the US ramp-up is successful, the company should show apparent US revenue growth in 2025-2026, and already in early 2025, signs of this accelerating growth (e.g., in H2/2024 revenue figures or new customer wins) could be visible. 

*Dilution compared to number of shares before Rights issue