GigPeak Inc. (NYSEMKT: GIG) is in the process of raising additional capital through equity issuance. The company plans to sell more than 11.3 million newly issued shares in a secondary IPO. While the transaction will immediately dilute value for existing shareholders, the management doesn’t seem to see any cause for alarm.
According to GigPeak Inc. (NYSEMKT: GIG), it is fundraising toward potential acquisition. Anyone who has been following developments in the semiconductor industry should be aware of the ongoing consolidation in the space. It seems a time has come that GigPeak believes that it can secure a prosperous future for its shareholders by acquiring strategic assets.
It has not been disclosed what type of assets GIG is set its eyes on. But you can speculate that focus could be on assets that would help the company grow faster, diversify its revenue streams and provide away to operate more efficiently.
How many shares on offer?
GigPeak Inc. (NYSEMKT: GIG) said it would be selling 11.3 million shares and that would significantly boost its outstanding shares by 54%. The new shares have been priced at $2, signaling a 23% discount on the price of the stock immediately before the secondary IPO was priced.
Selloff in the stock
The potential massive stock dilution and the hefty discount of the secondary offering triggered a selloff in the stock of GIG after the company priced the offering.
But selloffs triggered by secondary equity offering are not strange. Perhaps what might be strange in the case of GigPeak Inc. (NYSEMKT: GIG) is that it appears little thought is being given the ultimate outcome of the equity offering. For GigPeak to remain competitive in a rapidly transforming industry, it needs to improve its asset portfolio and that is something that should be cheered because that’s the reason the company is fundraising.
What transpired in the 1Q for GigPeak Inc. (NYSEMKT: GIG)?
GigPeak Inc. (NYSEMKT: GIG) generated revenue of $11.4 million in 1Q2016, up 25% over the same period a year ago. The company also registered growth in both its products and fees incomes and attributed those increases to strong demand for its products and solutions.