Robotic-surgery upstart Corindus Vascular Robotics Inc. (NYSEMKT:CVRS) is on the move again. This time around, investors appear pleased with a complex new financing arrangement that added $25 million to the company's war chest. The stock was up 28.6% as of 1:12 p.m. EST on Friday.
Corindus surged just ahead of its fourth-quarter earnings report, then sank yesterday. One issue was a troubling lack of cash right in the middle of a major product launch. The company ended December with $17.5 million in cash and equivalents, after operations lost $8 million in the fourth quarter.
Corindus raised the number of installed CorPath GRX surgical systems 43% during the final quarter of 2017. With just 33 installed, though, losses probably won't stop for a few more quarters at best.
Raising some cash to support CorPath's ongoing launch was hardly a choice for Corindus, but investors might want to read the fine print a few more times. Management touted a nondilutive capital strategy during its earnings call on Wednesday afternoon, but the Series A preferred stock it's selling is convertible into 20 million shares of common stock, at $1.25 per share. Exercising the option would raise the company's outstanding share count by 10.6% over present levels, and that's just the beginning.
The convertible preferred shares pay a whopping 12% annual dividend, to be paid in the form of more convertible preferred shares. To top it off, the company's offering investors warrants to purchase up to 8.75 million shares at $1.40 each and appointing a "seasoned investor" to the company's board of directors.
The CorPath's launch is going well, but long-term shareholders' slice of any profits it generates will get significantly smaller.