The Week’s Largest Closed Equity Transaction:

• On August 21, 2023, Skye Bioscience (SKYE: OTC) completed a PIPE with attached warrants offering for aggregate gross proceeds of $12M.
• Sky sold 557M units at $.021 per unit. Each unit included one common share and one warrant with a ten-year life and exercise price of $.021(0% premium).
• The warrant package is worth approximately $.0105 per unit, resulting in a net share price of $.0105, a 50.3% discount to the unit price level. This is the most expensive warrant package we have seen in a transaction of this type. Generally, these transactions include two to three-year warrants with 20-30% exercise premiums. Ten-year warrants, at zero premium, are virtually unheard of. The net result, to be fair, is a net share price not too far off preannouncement level pricing.
• The transaction, along with the concurrent convertible debt issue, implies a market cap of approximately $58.35M and an enterprise value of $35M. Most importantly, the equity and debt issues significantly increase the company’s liquidity, raising its free cash flow adjusted current ratio from a critically deficient -.6x to an adequate 1.13x. The company expects this liquidity to fund operations through 2024.
• The lead investors in the transaction were 5 AM Venture Management, LLC, and Versant Ventures.
• Following the transactions, SKYE intends to conduct a 1:250 reverse split with the goal of uplisting to a senior U.S. exchange.

Public vs. Private Raises: 

• All three companies that raised capital this week are public—all trade in the U.S. on OTC, and one trades in Canada on the NEO.

Equity vs. Debt Cap Raises: 

• Equity accounted for 43.0% of this week’s raises.