What happened
Shares of Amyris (AMRS 50.00%) jumped more than 12% today after the company announced two financial transactions that will affect its balance sheet.
First, existing shareholder Foris Ventures exercised existing warrants to convert roughly $70 million in debt into common stock. That move will dilute shareholders and remove that portion of the debt from the company's balance sheet. Second, Amyris raised $42 million in a combination of debt and stock sales from various shareholders.
As of 11:38 a.m. EST on Monday, the small-cap stock had settled to a 10.3% gain.
Image source: Getty Images.
So what
The stock is jumping today because investors are interpreting the transactions as the latest lifeline for the struggling company. Amyris has been walking a tightrope with its balance sheet since at least 2015 and has been forced to rely on numerous debt arrangements, stock offerings, reverse stock splits, and the like to stay listed on the Nasdaq exchange and keep the lights on.
To be blunt, the financing is less a vote of confidence in the industrial biotech company and more likely a bit of corporate raiding. The business has missed "only" a handful of debt payments over the years, but tends to come up with new financing from new financers to kick the can down the road. Holders of debt notes can collect double-digit interest rates in the process.
Of course, it all comes at the expense of individual shareholders, who have suffered five-year losses of 90%. Meanwhile, Amyris reported an operating loss of $90 million and a net loss of $163 million in the first nine months of 2019.
Now what
Amyris has a promising cosmetics portfolio, but has not been successful in a dozen or so other ingredients produced from its platform, and it suffers from terrible management. Investors hoping that the company can live up to its lofty promises should consider the long, troubled history of execution. Simply put, this stock doesn't belong in your portfolio.
