Summit Wireless Technologies Inc (NASDAQ: WISA) has been an interesting stock to follow as of late. After announcing the addition of new members to the WiSA association, the continuation of membership by LG and more, investors have sent the stock dramatically flying.
However, news is breaking this morning of yet another fund raise, and some investors are concerned. Nonetheless, in my view, there has never been a better time to get involved. Here’s why:
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WISA Fund Raise Is Actually A Good Thing
Over the past week or so, Summit Wireless Technologies has raised over $10 million from the issuance of new shares. Of course, the dilution is concerning for many and I’m expecting the stock to fall a bit today as a result. Nonetheless, this is likely a huge opportunity for several reasons.
First and foremost, nanocap companies tend to have a hard time raising funds. This puts them in tough financial positions, all too often, leading to losses for investors. However, WISA had no problem at all. In fact, the company has a market cap of around $8 million, but had no problem getting its hands on more than $10 million.
This is important as these big money institutional investors simply aren’t stupid. They play the game in the stock market better than just about anyone else. Of course, institutional players aren’t going to invest more than a company’s market cap unless they believe that the company is going to see tremendous growth ahead. So, the fact that WISA was able to raise these funds in the first place is a source of validation for the company’s work.
Beyond that, this sets the stage for a strong financial foundation. As with other nanocaps, Summit Wireless had been struggling financially for some time. However, with the $10 million brought in, plus the warrants involved in the deal that will bring money in down the line, there is no need for any more fund raises over the next two years or more.
In fact, if Summit Wireless Technologies executes from here, it will never have to raise funds again. That is something that is very seldomly said about a nanocap stock.
The Bottom Line
The bottom line here is simple. Dilution may be scary for many investors. However, in the nanocap game, it’s often a necessary evil. Nonetheless, with the expanding membership base of the WiSA association, and the fact that the company should have no need to raise funds in the future, this fund raise is actually a big step in the right direction.
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