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ExOne files to dilute shareholders -6

08:19 11-Jan-16


ExOne has filed a prospectus and 8-K on a new ATM (At-The-Market) facility to sell up to $50M in XONE shares.  At the most recent price of $8.60, that just happens to be roughly equivalent to the number of shares that were not yet floating.  There are worse forms of dilution, but this is unlikely to be taken well by the market.  While the market was certainly worried about a capital raise, I doubt that many expected it so early, and many were hoping it could be avoided entirely.  If ExOne fully exercises the facility, without changing the corporate structure and creating more shares, there will be 5.5M or almost 38% more floating shares than there previously were and the company will have no longer have any direct ownership of its operations, though of course, Rockwell and many board members will probably still own shares.

When MicroVision opened a similar arrangement, MVIS dropped 8.5%.  I was an apologist in that case, because it represented dilution of less than 4%.  Furthermore, management did it on good news in advance of a manufacturing ramp.  MicroVision's management validated that view by not making heavy use of the facility.  Without any faith in management, ExOne's action is likely to be taken as the first step towards becoming a company more like Ocata which, despite having very promising technology, failed to become viable on its own and wound up diluting shareholders to a tiny fraction of their original share worth.  Any readers who hold XONE shares and don't understand why this is a bad thing should read this article of mine on Ocata.

I've been saying for some time that ExOne would reach an inflection point in 2016.  This event looks like an early sign that it won't be a good one.  About the only thing XONE shareholders have going for them at the moment is the 25% shorted float and 48% rebate rate, which may cushion the blow some as shorts take profit.  Nonetheless, I have doubts that the bottom called here will hold.  Though I will continue to cover the company, I can no longer say that I think there's any way investors should be holding any XONE shares at anywhere near current prices.