Why Shareholders Might Be Fuming At Ocean Power Technologies Inc (NASDAQ:OPTT)


Ocean Power Technologies Inc. (NASDAQ: OPTT) is in the process of issuing common shares and warrants to purchase its common shares to enable it raise additional capital. The impact of the secondary securities offering will be dilutive on existing shareholders. But will there any benefits to existing and prospective shareholders once the securities transaction is closed?

According to Ocean Power Technologies Inc. (NASDAQ: OPTT), the reason for the securities offering is to raise additional funds to finance general corporate purposes. With that, you can read working capital to keep the company going.

As a company involved in developing renewable energy solutions, OPTT can be seen working to take advantage of the Paris climate deal. Under the Paris climate agreement, countries committed to convert their energy sources from fossil fuels to renewable energies. Therefore, the agreement creates demand for clean energy and OPTT wants to capitalize on the anticipated opportunity in the renewable energy industry.

As such, if the securities fundraiser is designed to accelerate OPTT’s renewable energy programs, the dilutive impact on the stock can be forgiven. If the company can get its renewable energy programs ready as nations begin to implement the Paris climate agreement, it should be able to maximize its revenue opportunities in the clean energy market.

What about the securities offering?

Ocean Power Technologies Inc. (NASDAQ: OPTT) is offering about 0.42 million shares together with warrants to purchase 145,950 shares of its common stock. At the end of the day, the company hopes to receive $1.6 million in net proceeds.

Is Ocean Power Technologies Inc. (NASDAQ: OPTT) avoiding debt?

Though dilutive, Ocean Power Technologies Inc. (NASDAQ: OPTT) has structured its securities fund raising in a manner that it will not immediately erode value for existing shareholders. For example, the warrants are exercisable after about six months. Additionally, raising funds through equity is a less expensive way for OPTT to fund its operations compared to taking debt.

Lease agreement

Ocean Power Technologies Inc. (NASDAQ: OPTT)’s securities offering follow on the heels of a lease agreement valued at about $0.98 million the company recently inked with an entity called Mitsui Engineering and Shipbuilding.


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