Shares of virtualization and data management company Sphere 3D (NASDAQ:ANY) are collapsing – down nearly 45% as of this writing. The reason? Sphere is floating a mix of common stock and warrants that it hopes will raise net proceeds of nearly $2.3 million (before deducting underwriting discounts and commissions and estimated offering costs).
3.3 million shares will be sold in an underwritten public offering at $0.70 apiece, and 990,000 warrants will be issued at an exercise price of $0.70 per share. The warrants will be exercisable immediately and will expire five years from the date of issuance, subject to certain exceptions.
Added to its current 9.4 million shares outstanding, this offering promises to dilute existing shareholders by as much as 45% — coincidentally, about the same amount that the stock is down today.
Another reason investors may be selling off ANY stock is the price at which these new shares are being offered. At $0.70 a share, Sphere is offering new stock for a price 36% below what its shares cost prior to the offering announcement.
On the other hand, these new shares won’t just raise the share count but they’ll also raise cash. Sphere intends to use the net proceeds from this offering for general corporate purposes. These purposes may include repayment of debt, working capital needs, capital expenditures, acquisitions and any other general corporate purpose.
The management will retain broad discretion over the allocation of the net proceeds from this offering.
Sphere 3D delivers containerization, virtualization, and data management solutions via hybrid cloud, cloud and on-premise implementations through its global reseller network and professional services organization. Sphere 3D, along with its wholly owned subsidiaries Overland Storage and Tandberg Data, has a strong portfolio of brands, including Overland-Tandberg, HVE ConneXions and UCX ConneXions, dedicated to helping customers achieve their IT goals.