In what gives a hint about how the market perceives the future of Second Sight Medical Products Inc. (NASDAQ: EYES), the company recently announced over-subscription to its rights issue. EYES was seeking to raise $19.8 million through the rights issue and it didn’t want to cross that target. As such, the management said it would return excess subscription to the investors.
To raise the $19.8 million sought, EYES decided to sell about 6 million newly issued shares to existing shareholders in rights issue format. The rights issue was priced at $3.315, signaling a 15% discount to the stock’s closing price before the rights issue commenced.
What’s the money for?
The net proceeds from the rights issue will figuratively give Second Sight Medical Products Inc. (NASDAQ: EYES) some extra eyes to see. In short, the company will be netting extra capital to specifically help with the post-market programs around its implant called Argus II.
EYES is targeting to expand the treatment label of Argus II to include dry-age-related vision issues, a move that should see the company expand the revenue potential of the device. Additionally, EYES wants to take Argus II to more markets and the additionally capital from the rights issue should pave the way to expand the market for the product domestically and internationally.
Second Sight Medical Products Inc. (NASDAQ: EYES) coping with the cash burn rate
As much as the rights issue will result in a dilutive impact on the stock of Second Sight Medical Products Inc. (NASDAQ: EYES), it provides the company with a low-cost way to cope with its cash burn rate. The company’s cash burn in 1Q2016 was $5.72 million and as of the end of that quarter it only had cash balance of $10.2 million. If you look at that against the cash burn rate, you see that without the rights issue fundraiser, the available cash could only take the company through two more quarters. But the rights issue now removes that cash shortage overhang and also saves EYES from the need of taking costly financing route such as debt.