Crossject announced it has issued zero-coupon convertible bonds (€5.7m) at 92% of their nominal value, maturing on 31 December 2021, convertible at the lowest price between €2.30 and an average market price less 10%. Gemmes Venture (Crossject’s main shareholder) has invested €2.1m in this issue, in line with its shareholding.

If the timing came a bit as a surprise, although forecasting it is impossible, the move is not. After the €2.6m structured financing agreed upon last month (see our Latest dated 19 November), this new issue will enable the group to finance the year to come. In short, and after the exercise of options (€3.2m), the group has raised c. €11.5m to which should be added public incentives (PIAVE, tax credit…) leading to a total of €13.4m to finance the company. In October, management had estimated Crossject would need c.€12m to finance its development over the next twelve months, so the issue is perfectly in line with expectations in terms of size. Obviously, there could/will be a dilutive impact once the bonds are converted.

At today’s price (€1.91 on Friday), this would lead to the creation of 3.68m shares (i.e. 18.5% of the total 19.72m diluted shares). All in all, we consider the issue as positive insofar as it secures the group’s need for the year to come, which should see the first market approvals. That said, the implied dilution will take its toll on our valuation, despite the cash inflow. We will adjust our numbers, considering that the conversion will take place at €2.3 (which implies that the share price will have gone up between now and the day of conversion), reducing the dilution to some 13.5%.

We will adjust our numbers, considering that the bonds will be converted at some stage during FY20. The current price is penalising, and it is likely that a real conversion will in fact take place at a higher price than today’s, thus our choice to use the €2.3 as the conversion price in FY20.

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