MAKO Surgical (MAKO.DL) is swimming in cash following a secondary equity offering of about 3 million shares. The offering priced at $13.15 per share, and after a hefty 6% underwriting discount (the fee made by the bank managing the offering), nets the company just over $40 million. The offering announcement came yesterday after the market closed, but it probably didn't come as a shock to some investors. Something fishy was going on yesterday, as MAKO shares fell nearly 10% on no meaningful news. Then came the official announcement. Once again, the individual investor is the last to know.
However, even with an impending offering announcement, it's unclear to me why shares sold off so sharply yesterday. The need for another capital raise has been a front-and-center issue for a number of quarters. With MAKO's cash balance sitting at only $28 million at the end of the third quarter, and the company burning cash at around $10 million a quarter, it was clear something would need to be done soon.
What remains unclear, and what might be behind the skittish response to the obvious rumors that were circulating yesterday, is timing. Why now? Sales execution was solid last quarter, with the company selling 15 RIO systems and calming heightened investor fears that MAKO was going the way of Hansen Medical (HNSN), which emerged on the medical robotics scene to great fanfare only to disappoint in a big way. If trends were truly moving back in the right direction, why not hold off until next quarter?
A bird in the hand is worth two in the bush
The answer could be as simple as the old adage above. With the level of volatility that markets have exhibited since the election, investors also have to understand the systematic, or broader market, risks that can also impact a future equity offering. MAKO needed to raise capital, and it matters little whether it was this month or two months from now. If you're a long-term MAKO bull, you shouldn't be discouraged by the news, as the additional cash should buy the company at least another 18 months.
