What happened
Shares of Amyris (AMRS) jumped nearly 29% today, after the company announced progress in its efforts to repay convertible debt notes bearing an interest rate of 9.5% that were due today. The pioneer in synthetic biology told investors it expects to repay the notes with "cash from a business transaction" and a planned equity investment from Foris Ventures, a fund affiliated with Amyris director John Doerr.
Repaying and retiring the notes in full will avoid significant stock dilution from the $57.6 million of original debt, which was scheduled to be payable in over 3.3 million shares of common stock. That's not much, relatively speaking, but considering Amyris has seen its share count explode from 25 million in mid-2017 -- following a 1-for-15 stock split -- to over 73 million today, investors are rewarding management for trying.
As of 2:30 p.m. EDT, the stock had settled to a 12.2% gain.
Image source: Getty Images.
So what
The full details of the transactions and equity investments weren't disclosed, but a separate filing with the Securities and Exchange Commission shows that Foris Ventures is extending an $8 million credit facility in the form of a promissory note to Amyris. The note is due in six months and was accompanied by a fee of $1 million, equivalent to a 12.5% interest rate.
That still leaves Amyris in need of an additional $50 million to retire the 9.5% notes in full. It doesn't exactly have a lot of bargaining power. After all, it recently disclosed that it overstated full-year 2018 revenue by at least $12 million -- or at least 15% of the total -- due to miscalculated royalty payments. Investors who read SEC filings could have seen that coming.
Now what
Missing guidance by 58%, overstating revenue, taking out new debt to repay old debt: Amyris stock is surrounded by flashing red lights warning individual investors to stay away. While the company continues to walk the tightrope of debt financing, exchanging one form of debt for another, its future is completely dependent on its ability to commercialize products from its research and development projects. Its failure to do so to date shouldn't be taken lightly by investors. Expect the stock to remain volatile.
