Smith Micro Announces Closing of Follow-on Offering

Rhea-AI Summary

Smith Micro Software announced the closing of its follow-on offering, issuing 1,910,000 shares of common stock at $2.15 per share to institutional and accredited investors. The offering included accompanying warrants, allowing the purchase of up to 1,910,000 shares at an exercise price of $2.34 per share.

The transaction resulted in approximately $4.1 million in gross proceeds, intended for working capital and general corporate purposes. The warrants will become exercisable six months after the closing date and expire five and a half years later. Roth Capital Partners acted as the exclusive placement agent for the offering. The shares were registered with the SEC under an effective shelf registration statement, and the warrants were issued in a private placement exempt from registration requirements.

Positive

• Smith Micro raised $4.1 million in gross proceeds.
• Funds are earmarked for working capital and general corporate purposes.
• Warrants allow for future stock purchase at $2.34 per share, potentially raising more funds.
• The offering was backed by reputable entities, including Roth Capital Partners and Buchanan Ingersoll & Rooney PC.

Negative

• The issuance of new shares and warrants could dilute existing shareholders' equity.
• The exercise price of $2.34 per share warrants may not be attractive if stock price falls below this level.
• Private placement warrants limit the immediate liquidity of these securities.

Financial Analyst

Smith Micro's recent announcement of a follow-on offering involves issuing 1,910,000 shares of common stock along with warrants at $2.15 per share. This raises the immediate question of dilution for existing shareholders, which in turn may impact the stock price negatively in the short term. The gross proceeds of $4.1 million before fees and expenses suggest a modest capital raise, intended for general corporate purposes and working capital. From a financial perspective, the company’s decision to issue warrants with an exercise price of $2.34 per share may offer upside for investors if the company's stock price appreciates in the future.

However, investors should be cautious of the potential for stock dilution and the impact on earnings per share (EPS). Dilution occurs when more shares are issued, reducing the ownership percentage of existing shareholders. While the capital raised can be seen as a positive move for strengthening the company's financial position, the specifics of how these funds will be utilized remain crucial. Effective deployment of these resources into growth initiatives, product development, or market expansion could justify the dilution and potentially drive long-term value.

An interesting aspect is the warrants’ five-and-a-half-year term, giving a fairly long horizon for potential stock price appreciation. Investors should monitor how Smith Micro plans to articulate its strategy for using these proceeds, as well as any forthcoming performance metrics that justify this capital raise.

Market Research Analyst

This follow-on offering by Smith Micro indicates a strategic move to bolster its financial reserves, which is not uncommon for companies looking to fund ongoing operations or new initiatives. The issuance of new shares and warrants is a clear sign that the company is actively seeking liquidity. However, it also highlights that they may not have sufficient cash flow from existing operations to fuel their growth plans.

From a market perception standpoint, the involvement of institutional and accredited investors in the offering is noteworthy; it suggests a degree of confidence in the company’s prospects from seasoned investors. The role of Roth Capital Partners as a placement agent also introduces a level of credibility to the offering process. However, the market will be closely watching how efficiently Smith Micro deploys the raised capital into revenue-generating activities.

A potential concern for retail investors is the timing and manner in which these new funds will impact the company’s competitive position in a crowded software market. The company’s ability to innovate and capture market share will be critical in justifying this capital infusion. Given the current market dynamics and competitive pressures, any misalignment between investment and expected returns might dampen investor enthusiasm over time.

PITTSBURGH--(BUSINESS WIRE)-- Smith Micro Software, Inc. (the “Company” or “Smith Micro”) (NASDAQ: SMSI), a software development company that sells proven solutions to wireless service providers, today announced the closing of its offering of 1,910,000 shares of its common stock or common stock equivalents in lieu thereof (together with accompanying warrants) at a price of $2.15 per share to certain institutional and accredited investors pursuant to a definitive agreement with the investors. The holders of the warrants will be able to purchase up to an aggregate of 1,910,000 shares of the Company’s common stock at an exercise price of $2.34 per share. The warrants were issued to the investors in a private placement and will become exercisable following the six month anniversary of the closing date for the transaction and will expire on the date that is five and one-half years after the closing date.

The offering resulted in gross proceeds to the Company of approximately $4.1 million prior to placement agent fees and other offering expenses. Smith Micro intends to use the net proceeds from this offering for working capital and general corporate purposes.

Roth Capital Partners acted as the exclusive placement agent for the offering. Buchanan Ingersoll & Rooney PC served as legal counsel to the Company, and Nelson, Mullins, Riley & Scarborough LLP served as legal counsel to the placement agent.

A shelf registration statement on Form S-3, File No. 333-264667, relating to the offering of the shares of common stock and common stock equivalents described above was filed with the Securities and Exchange Commission (“SEC”) and declared effective on May 12, 2022. A prospectus supplement describing the terms of the offering and the accompanying base prospectus were filed with the SEC and are available for free on the SEC’s website located at http://www.sec.gov. The offering of the common stock and common stock equivalents was made only by means of a prospectus. Electronic copies of the prospectus supplement and the accompanying prospectus relating to the offering may be obtained by contacting: Roth Capital Partners, 888 San Clemente Drive, Newport Beach, CA 92660, Attn: Prospectus Department, telephone: 800-678-9147, or by email at rothecm@roth.com.

The warrants were offered and sold in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act and in reliance on similar exemptions under applicable state laws. Accordingly, the warrants and underlying shares of common stock issuable upon exercise of the warrants may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Act and such applicable state securities laws. The Company has agreed to file a registration statement with the SEC registering the resale of the shares of common stock issuable upon exercise of the warrants issued in connection with the private placement.

This press release is not an offer to sell, or a solicitation of an offer to buy, 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 registration or qualification under the securities laws of any such state or jurisdiction.

About Smith Micro Software, Inc.

Smith Micro develops software to simplify and enhance the mobile experience, providing solutions to some of the leading wireless service providers around the world. From enabling the family digital lifestyle to providing powerful voice messaging capabilities, our solutions enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer IoT devices. The Smith Micro portfolio also includes a wide range of products for creating, sharing and monetizing rich content, such as visual voice messaging, optimizing retail content display and performing analytics on any product set. For more information, visit www.smithmicro.com.

Forward-Looking Statements

Certain statements in this release are forward-looking statements regarding future events or results, including statements related to the Company’s market and other conditions; the ability of the Company to satisfy its offering-related contractual post-closing obligations in connection with the offering; the anticipated use of proceeds from the offering; and other statements using such words as “expect,” “anticipate,” “believe,” “plan,” “intend,” “could,” “may,” “will” and other similar expressions. Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including risks and uncertainties related to market conditions, the satisfaction of offering-related contractual post-closing obligations in connection with the offering, and the use of proceeds from the offering. These and other factors discussed in our filings with the Securities and Exchange Commission, including our filings on Forms 10-K and 10-Q, could cause actual results to differ materially from those expressed or implied in any forward-looking statements. The forward-looking statements contained in this release are made on the basis of the views and assumptions of management, and we do not undertake any obligation to update these statements to reflect events or circumstances occurring after the date of this release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240514247170/en/

IR INQUIRIES:

Charles Messman

Investor Relations

(949) 362-2306

IR@smithmicro.com

Source: Smith Micro Software, Inc.

FAQ

What is the ticker symbol for Smith Micro?

The ticker symbol for Smith Micro is SMSI.

How many shares did Smith Micro issue in its follow-on offering?

Smith Micro issued 1,910,000 shares of common stock.

What was the price per share in Smith Micro's follow-on offering?

The price per share was $2.15.

How much did Smith Micro raise from the follow-on offering?

Smith Micro raised approximately $4.1 million in gross proceeds.

What is the exercise price for the warrants issued in the follow-on offering?

The exercise price for the warrants is $2.34 per share.

When will the warrants issued by Smith Micro become exercisable?

The warrants will become exercisable six months after the closing date.

How long do the warrants issued by Smith Micro last?

The warrants expire five and a half years after the closing date.

What is the intended use of the funds raised from Smith Micro's follow-on offering?

The funds are intended for working capital and general corporate purposes.