On Wednesday post market close, CEO and Chairman of the battered advanced cannabis cultivation and extraction solutions provider Agrify (US:AGFY) announced that he had invested $1.5 million worth of capital into the business as part of the most recent emergency funding transaction.
AGFY’s stock is trading down more than -99.5% over 2022 with the stock having a mere $2.8 million market capitalization prior to the latest capital injection.
Agrify first told investors last Thursday that they had entered into an agreement with financial institution Canaccord Genuity to launch a stock and warrant offering to raise additional capital for the balance sheet.
On Friday, AGFY updated the market with results from the offer, noting that around $8.7 million in gross proceeds were generated from the sale of 11.9 million shares at 65 cents per share (with 1.5 million in pre funded warrants to purchase stock and accompanying warrants to purchase a further 26.8 million shares).
In a Form 4 filing, CEO and Chairman Raymond Chang disclosed the purchase of 2,307,692 shares and 4,615,384 warrants with a total transaction value of $1.5 million for the equity component.
The purchase brings Chang’s total direct equity share count to 2,375,993 following the transaction.
Prior to this deal, AGFY had a total of 8.86 million shares outstanding on the register, meaning the deal will significantly dilute current equity holders.
While the dilution is not favourable to existing shareholders on the register, it was necessary with Agrify most recently reporting only $12.5 million in cash and short-term liquidity on the balance sheet during the most recent financial third quarter update in November.
During Q3, Agrify used $8.5 million in cash flow for operating activities and reported net losses of -$46.3 million, rising from -$9.8 million in Q3 of 2021.
At the time, management did tell investors that subsequent to the quarter, the firm had raised $15.1 million after fees from the issue of new shares through the previously announced ATM (at-the-market) equity program. However, the liquidity was only a temporary financing solution.
Agrify also downgraded full-year revenue guidance to $65 to $70 million from $70 to $75 million earlier during the result and blamed an unanticipated deferral of $5.3 million in sales due to a pending lawsuit from Bud & Mary’s.
Analyst Scott Fortune from Roth Capital Partners slashed his ‘neutral’ rating target price on the stock to 35 cents from 90 cents earlier after factoring in the dilutive offering.
Fortune believes the transaction was necessary given Agrify’s inability to secure a financing partner to build out its TTK deals.
Roth Capital expects a deal of this size following the reverse split will put additional pressure on the stock in the near term.
Fintel’s consensus forecast remains high at $5.41 but is yet to factor in expected downgrades from sell-side institutions after the recent event.
Fintel’s analysis of institutional ownership is bearish on AGFY with a weak fund sentiment score of 16.70. The score ranks AGFY in the bottom 7% of 35,288 screened global securities for the highest level of fund ownership.
This article originally appeared on Fintel
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