If they see a possible order or sales in the near future, they should wait till then to make a PIPE at a much higher price and much less dilution.
In this situation, I can speculate the follows:
1) EZ has no confidence that any sales are possible in the next few months
2) Not much good news in the future so that they have to use today's market strength to do financing
3) If there are any orders of 10k or 20k, they already have enough cash to cover the production cost, say, $5M to $10M. Unless they see an order of 50k or more, they don't need $ so urgently.
Anyway, those are just speculations for the worst cases.
Conclusion: I'm really concerned about the magnitude and the timing of the PIPE
Had they raised more cash up front when the NP1 was still a concept (and not an actual working chip...) the dilution would have been a factor of 3 greater.
Look at it this way, 43% of EZChips was sold in the first 2 venture rounds for a combined 25.5 Million Valuing EZChips at something like 65 million TOTAL.
Now if EZChips raises 20 Million and adds 10% to the # of ezchip shares.. EZChips will be valued at 200 million.
- A long.
They are juggling the NP1, QX1, NP2... Sales, tech support etc...
EZChips does not want to be in a position where their success is in any way threatened by a lack of available funds.
Raise the cash now and not worry about it. That is the best way... Then if you are waiting on a few million in receivables, you can sell /loan against the receivables an dmanage cash flow better.
If you don't owe anyone, nobody can damand payment at an inoportune time.
- A long.
<<banks are in no mood to lend money,>>
You're completely wrong. Your view is of the past. Banks are intensely interested in making loans to any viable entity.
<<in tech, no matter how good it looks.i do not think that is an option at this point.>>
I thought you said you were technically oriented. It would seem so because this view is several years out of date.
There is revolving credit and various other means of taking money down at a low fixed cost. At the current cost of money it's dumb to equity invest when the implied effective ROE is much higher. They may not be diluting, but they are pulling down forward ROE. The implication is that the purpose of the money isn't for purposes that a bank would underwrite. Specifically, it isn't mostly for ramping purposes. It's for R&D.