IPO Alert: VeriChip Sets Long-Awaited Terms

It looks like Applied Digital (ADSX) is finally going to see the backdoor play into VeriChip opened up.  VeriChip has made an amended filing with the SEC with its pricing terms being indicated.  The IPO is listed as 4.3 million shares, and the price range is indicated at $6.50 to $8.50 under the NASDAQ stock ticker "CHIP."  The over-allotment is set at 645,000 shares, so the full filing is for 4.945 million shaares.

Merriman Curhan Ford, C.E. Unterberg Towbin, and Kaufman Bros. are the underwriters, and this is likely the last filing before the pricing of the IPO.  This has been covered here as the RFID for people play, and Applied Digital (ADSX-NASDAQ) and Digital Angel (DOC-AMEX) are the backdoor plays into VeriChip’s IPO; Applied Digital owns a majority stake in VeriChip.  If the overallotment is exercised all of the overallotment shares will be sold by Applied Digital, so none of the extra proceeds will directly benefit VeriChip itself.

Here is a more detailed backgrounder on the issue we ran right after the first of the year.  If you want to know how long this has been around, do a web search on ‘Destron Fearing.’  I can personally recall this as an old private placement back in the "Reg. S days" that a company I worked for In Denmark had been inlvolved with back in 1995 or 1996, so this has been around for quite a long time. 

Assuming a mid-point pricing, CHIP will receive $26.9 million from the IPO share sales.  They plan to pay $7 million to Applied Digital for debt repayment; $8.0 to $10 million of the proceeds will used to develop a market for its VeriMed system; and the remaining balance will be used for general corporate purposes.

As of today, ADSX has a market cap of roughly $140 million, and with shares up 2.4% at $2.10 that compares to a $1.81 close-out price for the shares at the end of 2006.

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Jon C. Ogg
January 22, 2007