Nexstim raised EUR 650,000 with a convertible bond

Translation: Original comment published in Finnish on 06/26/2024 at 8:57 am EEST

 Nexstim announced on Tuesday that the company had raised EUR 650,000 with a convertible bond. We feel the bond was arranged on reasonable terms for the shareholders, with an interest rate of 7% and a conversion price of EUR 2.87. The bond strengthens Nexstim’s working capital and balance sheet as the company strives for positive cash flow. The strengthening of the balance sheet is welcome as the uncertainties of the near future have increased based on recent news. We will update our model to include the bond at the latest in connection with the H1 preview.

Disagreement on royalty payments increases the financial risk

Nexstim recently announced that it had disagreements regarding the license agreement with Magnus Medical. The expected royalty payments under the agreement have constituted a significant part of Nexstim’s cash flow in the coming years. The increased uncertainty in royalty payments has raised Nexstim’s financial risk, as the cash flow from continuing operations has so far been in the red. The recently signed letter of intent related to the treatment of Alzheimer’s may improve the financial position quickly, but the final implementation of the agreement is not yet certain. In our opinion, the funds now raised clarify the company’s financial situation and reduce the risk.

The bond was carried out on reasonable terms

The offering for an EUR 750,000 convertible bond was closed and EUR 650,000 of the bond was subscribed for. Funds were raised to strengthen working capital and the balance sheet. The bond also ensures sufficient funds for the self-financed share of the 1.5 MEUR loan applied for from Finnvera. The loan period ends either on the end date of a possible future financing round or on June 24, 2025 whichever occurs first. The subscription price per share is EUR 2.78, which corresponds to a discount of some 5% on Wednesday's closing price. However, the subscription price may be lower if the potential future funding round is carried out at a lower subscription price. The annual interest rate on capital is 7%. If the loan amount is converted to shares in full, it would increase Nexstim’s share capital by some 4.3%. As a whole, we believe the bond brings necessary support and predictability to Nexstim’s financing. We also feel the loan terms are reasonable for the shareholders.

Uncertainty is higher than normal in the near future

Nexstim has recently received significant positive news (letter of intent related to Alzheimer’s treatment) and negative news (uncertainty about royalty payments) considering the size of the company The news has increased the uncertainty related to the stock, as the letter of intent and the licensing agreement being resolved one way another can significantly impact Nexstim's cash flows and share value. Nexstim publishes its H1 results on August 16, when more information on the company’s contractual situation and financial position will likley be available.