Superconductor: When Raising Capital Takes More Value Than It Creates (SCON, RODM)

Superconductor Technologies Inc. (NASDAQ: SCON) is suffering after the company announced this morning that it has entered into agreements with institutional investors to directly place about $4.6 million worth of common stock at a price of $1.05 per share.  A Rodman & Renshaw Capital Group, Inc. (NASDAQ: RODM) subsidiary (Rodman & Renshaw, LLC) was the exclusive placement agent for the transaction.

What is adding pain is that in the offering it is also issuing warrants to those institutional investors that give the right to purchase up to 3,259,646 shares of common stock.

With a prior close of $1.25 and an offering price of $1.05 per share, the stock is down 24% at $0.94.  As far as the warrant exercise price, that is above yesterday’s close and is at $1.35 per share.  These warrants can be exercised 6 months after the issuance and they will terminate five years after the date of issuance.

Before the addition of any new shares, Superconductor Tech has a market value after the large drop of about $31.5 million and this is causing a 52-week low to be hit.  The 52-week trading range is $1.09 to $4.19.  If the market capitalization data from Yahoo! Finance is accurate, this is a financing that cost far more in market cap than it raised.

The company better hope that this does not keep its shares under the $1.00 mark for too long, otherwise its shares could be delisted solely on the sub-$1.00 share price.