Capstone Takes On More Dilution (CPST)

Capstone Turbine Corporation (NASDAQ:CPST) has agreed to sell 14.45 million units comprised of one share of common stock and one warrant to purchase an additional 0.75 of a share of common stock. The company expects to realize about $11.2 million in net proceeds from the offering.

The units will be sold to “selected investors” for $0.865/unit, and the warrants have an exercise price of $0.95/share that is good for seven years. If all the warrants are exercised, up to another 10.84 million new shares will be issued.

At the same time, the company released its expected revenue numbers for its fiscal year 2009, which ended on March 31st. Capstone anticipates about $44 million in annual revenue, up 41% from $31.3 million for the previous fiscal year. The company expects its order backlog to improve from $27.9 million a year ago to $61.4 million as of March 31st.

Capstone shares are off nearly 9% in early trading, down to $0.788. Before today’s announcement the company already had about 174 million shares outstanding, so this dilution of about 8% plus the additional warrants and a prior capital raise is likely to put a near-term cap on how much shares could rise over the $1.00 mark until all of these shares can be absorbed over time in the float.

Paul Ausick
May 4, 2009