MICT Inc (NASDAQ: MICT) is gearing up for a massive launch of what will prove to be a major driver of revenue in 2021 and beyond. For some time, the company has been talking about the launch of a trading platform, and with a capital raise that was announced today, I’m willing to bet my bottom dollar that the launch is coming sooner, rather than later.
Here’s what’s happening:
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- MICT Raises Funds at a Premium
- The Capital Raise Improves the Balance Sheet
- This Is a Clear Sign That the Trading Platform Is Coming
- Final Thoughts
MICT Raises Funds at a Premium
In a press release issued early this morning, MICT announced that it has entered into a securities purchase agreement with institutional investors. The agreement surrounds the purchase and sale of 22,471,904 shares of common stock, 22,471,904 Series A Warrants to purchase 22,471,904 shares of common stock and 11,235,952 Series B Warrants to purchase 22,471,952 shares of common stock at a combined purchase price of $2.67, representing a small premium over yesterday’s closing price.
Importantly, the gross proceeds from the raise are expected to be about $60 million prior to deducting expenses associated with the offering.
The Series A Warrants associated with the offering will be exercisable six months after the date of issuance with an exercise price of $2.80 per share. These warrants will expire five and a half years from the date of issuance.
The Series B Warrants will be exercisable six months after the date of issuance with an exercise price of $2.80 per share. These Warrants will expire three and a half years after the date of issuance.
Finally, MICT said that the offering is expected to close on or about February 16, 2021. As is always the case, the offering is subject to customary closing conditions.
The Capital Raise Improves the Balance Sheet
This is massive news for MICT and its investors. Not only were the funds raised at a slight premium, these funds will make the balance sheet at the company incredibly appealing.
In fact, as a result of the fund raise, by my calculations, the company’s balance sheet will have about $1 per share in cash on hand. Considering this, a clear undervaluation in the stock is beginning to present itself.
Moreover, this undervaluation becomes more pressing when considering recent announcements from MICT.
This Is a Clear Sign That the Trading Platform Is Coming
Most importantly, investors have been waiting for the launch of the company’s trading platform. Earlier this week, we learned positive news when MICT announced that it had partnered with the Shanghai Petroleum and Natural Gas Trading Center to provide trading and margin services to the company’s customers, which represent about 20% of volume of these trades in China.
Now, the company is raising funds to greatly improve its balance sheet.
So, what does the fundraise have to do with the trading platform? EVERYTHING!
MICT announced that it will offer margin loans through its trading platform. However, capital is needed to fund these margin loans. This fundraise gives the company all the capital it needs to move forward with its trading platform plans.
Moreover, considering that the Chinese New Year is coming to a close relatively soon, it only makes sense that the company is gearing up for a launch, which I’m expecting to be announced in the coming weeks, or sooner, based on recently published announcements from MICT.
All in all, things are looking great for MICT. The recent announcements from the company suggest that its trading platform will be launched soon, and be met with an incredible audience, generating significant revenues in the process. Moreover, institutional investors clearly see value here. After all, capital raises don’t generally happen at premiums. All told, MICT stock is one to watch closely.
Disclosure. CNA Finance is not a financial advisor or broker dealer. This article does not constitute a solicitation to buy any stock mentioned. The article represents the honest opinions of the author, but not necessarilly the outlet it was published on. CNA Finance has a monetary relationship with MICT. Trading in penny stocks can result in the loss of capital.