Why InspireMD Inc. (NYSEMKT: NSPR) Is Diluting Its Stock


InspireMD Inc. (NYSEMKT: NSPR) is in the process of issuing some new preferred stock and warrants to purchase common stock in a fundraiser expected to net about $14.6 million. The management said that the issuance of new shares is being done to enable the company raise cash to finance sales activities relating to its products called MGuard Prime EPS and CGuard EPS.

Portion of the proceeds from the securities offering is also expected to go into funding product development. NSPR is trying to use innovation to give its products a distinction on the market and thereby fuel sales.

What’s on offer?

InspireMD Inc. (NYSEMKT: NSPR) said it will issue 442,424 shares of the Series B convertible preferred stock. The company is also offering warrants to purchase about 44.2 million shares of its common stock. The offer of the securities is expected to generate about $15 million in gross proceeds.

After deducting expenses and paying commissions related to the securities offering, NSPR expects to have net proceeds of $14.6 million. That is what the management hopes to funnel to the sales activities of the two identified products and to R&D as well other corporate matters.

What is the conversion rate?

The preferred stocks being issued will convert at the rate of 100 common shares for each preferred share.

The impact of the offering

The securities offering is expected to help InspireMD Inc. (NYSEMKT: NSPR) escape a potential cash crunch situation that could cripple its operations. Remember that the company closed 1Q2016 with cash and equivalents amounting to $2 million, yet it consumed $2.5 million during the quarter.

But the issuance of the new preferred shares and warrants to purchase shares will have a dilute impact on the existing shareholders. However, it offers a lower cost way for the company to plug its cash shortage without taking on more debts and further leveraging its balance sheet.

Previous equity fundraiser

Earlier this year, InspireMD Inc. (NYSEMKT: NSPR) raised about $1.1 million through a secondary IPO. The fundraiser was also aimed at backing the activities around CGuard EPS and MGuard Prime EPS.


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