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Here’s Why Reshape Lifesciences Inc (RSLS) Shares Are Taking a Nosedive


After pricing an equity offering that will dilute current investors but help shore up its balance sheet, shares in Reshape Lifesciences Inc (NASDAQ:RSLS) are tumbling 48% in pre-market trading Monday.

The medical device maker has entered into a securities purchase agreement with an institutional investor providing for the purchase and sale in a registered direct offering of shares of series D convertible preferred stock and a warrant to purchase shares of common stock for a purchase price of $6.0 million.

The shares of series D convertible preferred stock will be convertible into an aggregate of 8.0 million shares of common stock at a conversion price of $0.75 per share and the warrants will have a one-year term (or, if later, eight months after the requisite stockholder approval is obtained) and be exercisable for 35 million shares of common stock at an exercise price of $0.75 per share. ReShape Lifesciences expects to receive net proceeds of approximately $5.25 million after deducting placement agent fees and other offering expenses. If the requisite stockholder approval is obtained, and if the warrants are exercised in full, ReShape Lifesciences would receive an additional $26.25 million in gross proceeds based on the initial warrant exercise price of $0.75 per share. ReShape Lifesciences intends to use the net proceeds from the registered direct offering to continue its commercialization efforts, for clinical and product development activities, and for other working capital and general corporate purposes. The closing of the offering is expected to take place on or about April 4, 2018, subject to the satisfaction or waiver of customary closing conditions.

ReShape intends to ask its stockholders at its 2018 annual meeting for the requisite approval for the conversion or exercise of the securities described above into shares of common stock exceeding 19.99% of the company’s currently outstanding common stock for purposes of the NASDAQ Stock Market Rules and has entered into voting agreements with stockholders representing a majority of the company’s outstanding common stock pursuant to which those stockholders have agreed to vote in favor of that proposal.