Crown ElectroKinetics (NASDAQ: CRKN ) stock is up 50% and change this morning. It is true that things are happening to CRKN stock but we tend to doubt they’re going to be all that value adding. For the next event is the annual general meeting, where they’re going to issue some more stock, then issue some more stock, then ask for permission to issue some more stock. Those three not usually known to be particularly value additive.
We’ve talked before about Crown ElectroKinetics:” Except that's not the only issue here. For there was also an announcement to Edgar (the SEC) about registering stock for potential sale. This isn't a rights issue, or stock issuance by the company. This is a shelf registration (ie, let's do the paperwork now and then maybe, or maybe not, do the thing itself later) to allow current holders of stock to sell if they wish to. More precisely, certain currently restricted stock and warrants will convert to common stock and then that common stock may be sold.
Well, announcing that lots more common stock could come to market is going to have a depressive effect on that stock price. More means less, right?
We would expect the influence of that expression of confidence to wane and the effects of the potential stock issue to increase over the day and following. Unlike the CEO we're not entirely confident but that's the way we expect it will work out.”
Events did turn out as we predicted, that surge in the Crown Electro stock price soon faced away.
Crown ElectroKinetics stock price from Google Finance
We’d also run with this as our prediction for the stock price rise today. For as we say the next thing is the AGM where: “.To approve a reverse stock split of our Common Stock, par value $0.0001 per share (“Common Stock”), at a ratio of not more than 1-for-60 (the “Reverse Split Amendment”), such ratio to be determined by the Board of Directors on or prior to December 15, 2023, in its sole discretion; 4.To approve the issuance of shares of Common Stock to holders of certain senior secured notes in connection with the extension of the maturity date thereof; 5.To approve the issuance of shares of Common Stock and warrants to purchase shares of Common Stock to holders of certain of our secured convertible notes in connection with the amendment and waiver of certain terms thereof; 6.To approve private placements of shares of preferred stock and warrants to purchase Common Stock; 7.To approve the issuance of shares of Common Stock in connection with extensions of the maturity date of promissory notes pursuant to our line of credit; 8.To approve the issuance of shares of Common Stock to holders of our demand notes; 9.To approve the issuance of shares of our Common Stock pursuant to the our equity line of credit;”
We’d suggest - even before the more general ability to issue new stock they’re also looking for - that a considerable amount of equity dilution is about to happen. We tend to doubt such things are value positive for the stock price. We would therefore suggest - only suggest - that this morning’s 50% rise is likely to fade away again.
