Velo3D, Inc. (NYSE:VLD), a company specializing in industrial machinery, has entered into an agreement with certain warrant holders to significantly reduce the exercise price of their existing warrants. The agreement, made on Monday, will see the exercise price drop from $19.78 to $2.28 per share for a total of 742,857 warrants.
As part of the inducement agreement, Velo3D will also issue new warrants allowing holders to purchase an additional 1,485,714 shares of common stock at the same reduced price of $2.28. This transaction is expected to close today, with the company potentially raising gross proceeds of approximately $1.62 million, before expenses, if all warrants are exercised.
The new warrants will be exercisable immediately upon issuance and will expire five years from their initial exercise date. They include provisions for a cashless exercise if there is no effective registration statement or available prospectus at the time of exercise. Adjustments to the exercise price and number of shares are also stipulated in the event of stock-related corporate actions or a fundamental transaction.
The new warrants and the shares of common stock underlying them were offered under a previously effective registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission on November 21, 2022.
In the event of a fundamental transaction, the new warrant holders will be entitled to receive the same type of consideration, at the Black Scholes Value of the unexercised portion of the warrant, that is offered to common stockholders. The beneficial ownership limitation has been set at 4.99% or, at the holder's election prior to the issuance, 9.99% of the outstanding common stock after the exercise of the new warrants.
In other recent news, Velo3D has been navigating significant developments. Amid cost-cutting measures, the company announced a 30% reduction in its workforce, affecting approximately 63 employees. This move is part of a broader strategy to bolster operational efficiencies. Despite this, Velo3D's Q1 2024 revenues reached $10 million, showing a marked increase from the previous quarter. However, the company reported a negative gross margin of 29%.
Velo3D also confirmed Brad Kreger as the permanent CEO, following his successful stint as interim CEO. Under Kreger's leadership, the company saw a significant realignment of its operations and a marked reduction in operating expenses. In addition, Velo3D's board of directors approved a 1-for-35 reverse stock split, aiming to meet the New York Stock Exchange's minimum share price requirement for continued listing.
The company has been notified of non-compliance with certain NYSE market capitalization and stockholders' equity requirements. In response, Velo3D plans to submit a proposal to regain compliance with the listing standards. However, the company remains optimistic about its future performance, projecting a full-year revenue between $80 million to $95 million, and expecting improvements from the defense, space, and aerospace sectors.
InvestingPro Insights
As Velo3D, Inc. (NYSE:VLD) moves to adjust the exercise price of its warrants, investors may be evaluating the company's financial health and market performance. According to InvestingPro data, Velo3D currently holds a market capitalization of approximately $19.65 million. Notably, the company's Price / Book ratio stands at a low 0.43 as of Q1 2024, suggesting that the stock is trading below its book value, which could indicate potential undervaluation in the eyes of value-oriented investors.
However, the financial metrics also reveal challenges, with a revenue decrease of 35.02% over the last twelve months leading up to Q1 2024, and a significant gross profit margin deficit of -52.22%. These figures underscore the company's operational difficulties, which are also reflected in the stock's performance, with a 1-month price total return of -28.3% and a 6-month price total return of -74.17%.
InvestingPro Tips highlight that Velo3D operates with a significant debt burden and may struggle with making interest payments, which is critical information for investors considering the potential risks associated with the warrant price reduction. Additionally, the company is not expected to be profitable this year, and analysts have revised their earnings expectations downwards for the upcoming period. For those seeking further insights, there are additional tips available on InvestingPro's platform, which could provide a more comprehensive understanding of Velo3D's financial position and future outlook.
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