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Yesterdays funding announcement came as a bit of a surprise, but is the latest in a series of what is now becoming a complicated shareholder/funding structure. Within the last month alone we had the equity placing to raise $10m at 20p a share (although at that time only $4m could be raised because of the nasdaq 20% restriction). So the placing was split into two - a first placing for 20m shares to raise $4m; and a second placing to raise a further $6m subject to a general meeting on 22nd April to deal with the Nasdaq listing issue. As it turns out, forward commitments to the second placing now mean a further $2m has been raised, taking the total under the equity placing to $12m. We know the take up was good amongst existing shareholders. Now, less than a month later, we are told that DB Capital Partners Healthcare are taking an initial 2.6m shares for $1m on nasdaq; with the option to increase for a further 8m shares at the same price (c.30p) to take them up to $4m. That's just under 9% of the business and would make them the 4th largest shareholder. The web site link for DB Capital looks like it was put together over the weekend; and good luck finding out any details on the 'founding partners'. How did this come about - did they try and get into the initial equity raise, miss out, and come back to be told told price was now 30p under a share purchase agreement? Who do they know that allowed this to take place. What drove the need to raise $4m so shortly after the $12m last month? Alongside this, anyone remember the $21m convertible bond fundraise in 2022 advised by Heights Capital. Turns out the fund behind this is a company called CVI Investments (channelling money for high net worths, trusts etc), based in the Cayman Islands, and represented by William Walmsley, Director who lives there. They now own 8.5m shares in Renx as a result of the company settling its annual interest coupon and capital repayments in cash. Its an intriguing picture to say the least given the current 'formal sale process' and I'm not entirely sure what to make of it all. SB
Sorry - CVI Investment bond to date has been settled in shares, not cash....doh. SB
Not very transparent……but I doubt the recent investors expect to lose money so it is either
A) guaranteed profits from a quick sale for the new / participating shareholders
B) significant dilution of existing shareholders through a series of these transactions so that if the business is ultimately successful they take a much larger share of the spoils.
Answer me this, do we think
DB Capital is Smart or Dumb money?
And how much integrity does the Board have to act in the interests of all shareholders?
The funding issue has been apparent for a while…..arguably RENX should have raised significant liquidity (many years of expected outflows) several years ago, but it has almost deliberately existed with minimum liquidity for maximum control by a couple of shareholders who might not mind a low share price to take control.
I expect a knock down sale to the recent investors / management. - 40-50p feels about right so the Board can justify a transaction with a significant premium for other shareholders.
Not up to the board to have a quick sale. They have to open up bids to the wider market. Anyone can bid. Shareholders have to vote to seal the deal once the process for bidding is completed. Why would any shareholders vote to accept a low ball management bid?
They have to follow the takeover code. It's the law.
There are no easy answers here - that's the reality of being a private investor on AIM. I don't think its as simple as to whether DB are smart or dumb - its what is going on behind the scenes that led to this transaction which appears murky. Why are they being allowed to pick up 10% of the company for $4m when as it stands Renx does not need the funding - that's a larger holding than Harwood/Mills - and their 10% holding cost a lot more than $4m. The company has made it clear the formal sale process may or may not result in an acceptable offer - and if not the company will continue in its present form. In the event the company ran out of money with no more funding available then it could go private via a low ball offer from existing majority shareholders or even a pre pack administration. I don't think that will be the case given the recent take up of new shares from the equity placing. The company is essentially owned by 10 major shareholders and its management - who have shown that when funding is required they commit, albeit the recent 'strategic' interest no doubt helped matters. PI's probably account for less than 20% of the shares in circulation so we are all essentially bystanders. The growing II interest is what provides comfort that we won't end up being shafted as they would end up in a similar position - DB Capital included.
One final point - the securities purchase agreement RNS relating to DB Capital includes reference to the funding being used for 'commercial sales' and to 'provide enhanced optionality' during the sales process just to throw some further intrigue into the debate.....SB
This company has been doing the hard regulatory and clinical yards and is tantalisingly close to embedding its tests and IP into diabetic and CKD treatment plans in the US which is a huge market. The unknowable is whether they can access the market effectively and overcome the hurdles of suddenly needing operational scale. I think they will need a significant capital injection and operational partnerships. The sale process is one way of crystallising these.
The outcome I hope for is a JV with a distribution partner providing a cash boost to RENX today and a stake in the future profits of that JV.