Avid Bioservices Announces Proposed Private Placement of Convertible Notes
- None.
- Potential decrease in the market price of the company's common stock due to unwinding capped call transactions with respect to the 2026 Notes and related derivatives sales.
- The 2029 Notes and any shares issuable upon conversion have not been registered under securities laws, limiting their sale in the United States.
Insights
The issuance of $160 million in Convertible Senior Notes by Avid Bioservices represents a strategic financial move aimed at restructuring the company's debt profile. By opting to repurchase a portion of its 1.250% Exchangeable Senior Notes due 2026, the company is likely trying to take advantage of current market conditions to lower its interest expenses or extend the maturity of its debt. This could potentially lead to an improvement in the company's leverage ratios and interest coverage metrics, which are important indicators of financial health that investors closely monitor.
However, the market's reaction to such an offering can be mixed. While it might signal confidence from management in the company's future cash flows, it also dilutes existing shareholders if the notes are converted into equity. Additionally, the unwinding of capped call transactions could lead to short-term volatility in the stock price as counterparties adjust their positions. Investors should weigh the potential benefits of improved financial flexibility against the risks of dilution and market volatility.
The offering of Convertible Senior Notes in a private placement is a nuanced legal process governed by the Securities Act of 1933. Avid Bioservices is targeting qualified institutional buyers, which allows them to bypass the more rigorous public registration requirements. This can expedite the capital raising process but also limits the pool of potential investors, as the notes cannot be sold to the general public without registration or an applicable exemption.
The mention of the notes not being registered under the Securities Act highlights the regulatory landscape companies must navigate when issuing securities. The legal stipulations and exemptions involved, such as those under Section 4(a)(2), are critical to ensure compliance and avoid sanctions or legal disputes that could negatively impact the company and its stakeholders.
The biologics contract development and manufacturing sector is highly capital-intensive, requiring significant investment in technology, facilities and expertise. Avid Bioservices' decision to issue convertible notes may reflect underlying industry trends where companies are seeking to bolster their capital structures to fund growth initiatives or technology upgrades. It is important for stakeholders to consider the competitive landscape and the potential for this capital to be used in ways that enhance the company's service offerings or operational efficiency.
Moreover, the potential repurchase or repayment of the existing 2026 Notes could be a strategic move to manage investor expectations and signal financial prudence. The impact of such financial maneuvers on the company's stock price and market perception should be monitored closely, as they can influence investor confidence and the company's ability to raise capital in the future.
TUSTIN, Calif., March 06, 2024 (GLOBE NEWSWIRE) -- Avid Bioservices, Inc. (NASDAQ:CDMO), a dedicated biologics contract development and manufacturing organization (CDMO), announced today that it intends to offer, subject to market conditions and other factors,
The 2029 Notes will represent senior unsecured obligations of the company and will accrue interest payable semiannually in arrears. Upon conversion, the company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election. The interest rate, initial conversion rate and other terms of the notes will be determined at the time of pricing of the Offering.
The company expects to use the net proceeds from the Offering (i) to repurchase for cash a portion of its
In connection with the repurchase or repayment of the 2026 Notes, the company expects to unwind its capped call transactions with respect to the 2026 Notes with the applicable counterparties. In connection with any such termination, the company expects the counterparties to such capped call transactions and/or their respective affiliates will unwind various derivatives with respect to the company’s common stock and/or sell shares of the company’s common stock concurrently with such termination. This activity could decrease the market price of the company’s common stock at that time.
The 2029 Notes and any shares of the company’s common stock issuable upon conversion of the 2029 Notes have not been and will not be registered under the Securities Act, any state securities laws or the securities laws of any other jurisdiction, and unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.
This press release is neither an offer to sell nor a solicitation of an offer to buy any of these securities nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification thereof under the securities laws of any such state or jurisdiction. Further, this press release is not an offer to repurchase the 2026 Notes. As described in the Current Report on Form 8-K filed by the company on March 6, 2024, all of the 2026 Notes have been accelerated and became due and payable pursuant to an acceleration notice the company received from a holder of the 2026 Notes on February 29, 2024.
Forward-Looking Statements
Statements in this press release, which are not purely historical, including statements regarding the timing, size and expected completion of the offering of 2029 Notes, the expected unwind of the company’s capped call transactions with respect to the 2026 Notes, the use of proceeds from the offering, and other statements that are not statements of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties including, but not limited to, those related to market and other conditions; the risk that the conditions to the closing of the proposed offering are not satisfied; and other risks and uncertainties that are described in the Risk Factors section of our annual report on Form 10-K for the fiscal year ended April 30, 2023, as well as any updates to these risk factors filed from time to time in our other filings with the Securities and Exchange Commission. We caution investors not to place undue reliance on the forward-looking statements contained in this press release, and we disclaim any obligation, and do not undertake, to update or revise any forward-looking statements in this press release except as may be required by law.
FAQ
What is Avid Bioservices, Inc.'s ticker symbol?
What is the purpose of the $160 million Convertible Senior Notes due 2029 Offering?
How will the net proceeds from the Offering be utilized?
Are the 2029 Notes and shares issuable upon conversion registered under securities laws?
What impact could the unwinding of capped call transactions have on the market price of the company's common stock?
