Of Arrows and Archers

On September 5, 2018, speaking at the "HC Wainwright" investment conference in New York, Perry Mulligan made the following statement (full transcript here), emphasis mine:

"In the past, we've demonstrated our willingness to explore just about every vehicle available to developing relationships with our customers. We are committed to providing module solutions. That's what we're marketing to the Street today. We have executed development of modules and components for others. We've also licensed some of our products ODM and OEM. And we've done engineering services works. And I commit to you that we will continue to invest in all of those vehicles, before we come and try to do any other dilution or any other form of equity raise, that isn't advantageous to us. So, we have lots of arrows in our quiver. We have a pretty experienced management team with large market in front of us. Our technology is that the maturity curve it needs to be to accomplish the task we set in front, which is to monetize that in these large markets today."

While the formulation is a little strange, and possibly allows for varied interpretation, it's my belief that this statement conveyed to the listener that the company did not intend to issue additional shares until after they had completed at least one of the items that were mentioned (i.e., fired an arrow from their quiver), and thereby positively moved the needle on the share price, in order to reduce the dilutive impact on the existing shareholders.

Perhaps a better statement would have been, "Historically, we have issued shares to raise operating funds as we see fit. We'll plan to continue that until we get to profitability, or otherwise are able to access the necessary capital from our customers or elsewhere."

It is hard for me to reconcile today's news (MicroVision Prices $4.2 Million Offering of Common Stock) with the September statement. Yes, seven million newly issued share count is relatively low by MVIS equity raise standards. But the price of $0.60 is really low, and it certainly does not appear that they fired any of the above arrows prior to executing this dilutive raise. Indeed, not even the new video of Interactive Display referenced on the last conference call would be released prior to today's financing. 

The "new news" that perhaps affected the thinking here was that the previously described $3-4M of NRE from the still-unnamed Display Only licensee that was expected to be received in Q318 had been obviated. This money was described as no longer needed as the licensee now believes the previously provided reference design layout of the module will meet customers' needs. So, it's great the module is good-to-go as designed. But it was apparently important to capture that additional revenue. 

It's also fair to point out that the market has undergone a directional change since September (NVDA for example is down 48%). The company may feel they need that funding to support their production ramp, to maintain a minimum cash level, or for some other reason. But given the small amount raised ($3.7M after fees), the lack of arrow-firing beforehand, and the drubbing the share price has taken, I think it's fair to question if the right approach was taken here, vs. say, a bank loan for the same amount. 

Perry acknowledged in conference calls earlier this year, that previously, Microvision had set expectations that were not met, and that under his leadership, the company would under-promise and over-deliver. Perry has made doing what they said they would do into a real point of pride and emphasis in his communications. I find today's news particularly puzzling given the September statement and this emphasis on building credibility. Perhaps in time we'll come to understand this better.

With all that said, "We're on to 2019".