Netlist, Inc. (NASDAQ: NLST) has been on the top of many watch lists after the company announced that a claim construction order in its favor was issued in patent litigation. However, many pointed out that the company didn’t have the money to make it through litigation. So, unsurprisingly, yesterday, the company announced a registered direct offering of common stock, leading to a drop of more than 40%. Nonetheless, the stock is bouncing back off of lows today. Below, we’ll talk about:
- The offering;
- why after the tremendous declines, NLST may be a buy;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
NLST Bounces Back After Offering
As mentioned above, Netlist has been on a run after patent litigation led to a favorable claim construction order for the company. However, as many pointed out, the company had little cash on hand, and the gains allowed for a dilutive offering. That offering was processed yesterday.
In a press release issued yesterday morning, the comapny announced a definitive agreement wth institutional investors surrounding a registered direct offering with proceeds of around $10 million. In the offering NLST issued about 22.22 million registered shares at $0.45 per share. Also, each share came with a registered warrant to purchase half a share of common stock at an exercise price of $0.655. This news sent the stock tumbling.
Why NLST May Be A Buy At These Levels
Previously, I weighed in stating that I wouldn’t buy NLST at the highs it was experiencing. Much of this had to do with the company’s horrible cash position. However, after the declines and the injection of cash, this stock may be worth consideration. The company has is in the midst of litigation that could lead to a large injection of funding. My concern was that the company would not make it through litigation, but with the injection of funds through the registered direct offering, this concern is now null. All in all, getting in after recent declines may offer an opportunity for long term gains as the company is likely to be the winner of patent litigation that could be worth tens or even hundreds of millions of dollars.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dig into the market is that the news leads to moves. In the case of Netlist, the news has led to a bit of a roller coaster ride, and the roller coaster is moving up today. With no more immediate need for funding and the prospect of a patent litigation win around the corner, excited investors are sending the stock up in the market. As is normally the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (8:25), NLST is trading at $0.40 per share after a gain of $0.031 per share or 8.37% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on NLST. In particular, we’re interested in following the patent litigation as it has the potential to generate serious funding for the company. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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