The share price of defense company RADA Electronic Industries more than doubled in 2019, and the positive trend continued in early January, adding 25% more to the share price, as of last Tuesday. The company has decided to take advantage of this opportunity to raise money on the basis of its existing shelf prospectus. RADA announced the measure yesterday, and has guaranteed itself $20.3 million, an amount that will grow if the underwriters exercise their greenshoe option to buy more shares.
RADA issued 4.2 million new shares at $5.25 a share, constituting a 16.5% discount on the previous day's closing price. The underwriters received a 30-day option to buy up to 629,000 shares at the same price, which will increase the gross proceeds from the offering to $25.3 million if exercised. According to the shelf prospectus, the company plans to use the proceeds for its general business needs. RADA had $17 million in cash as of the end of the third quarter.
Following the offering, RADA's share price receded 4.5% to $6 on Nasdaq yesterday, still 14.5% higher than the price for the offering. RADA's market cap is $231 million.
RADA, managed by CEO Dov Sella, manufactures tactical radar systems for ground troops, in addition to its more long-standing avionics business. US investment institutions took part in the financing round, in contrast to previous rounds, in which Israeli institutions invested. The reason that the company aimed at the US capital market this time was in order to gain greater recognition and more coverage by analysts. RADA recently opened a new production facility in Maryland.
Following the new financing round, the holding of RADA's largest shareholder, DBSI Investments, owned by Yossi Ben Shalom and Barak Dotan, will fall from 17.9% to 15.9% (including exercise of the underwriters' options). The value of DBSI's current holding is $41 million.
DBSI invested a few million dollars in RADA nearly four years ago, when the company had liquidity problems. DBSI took action to upgrade the company, and has sold shares a number of times over the years at prices much higher than the price at which it invested. Last summer, for example, DBSI sold 7% of RADA's shares to Israeli investment institutions for $12.7 million at $4.70 per share. Soon after this sale, RADA's share price zoomed, following the attack on Saudi Arabia's oil facilities. The attack brought RADA to the attention of investors, because the company's technology detects unmanned aerial vehicles. RADA's current shareholders include Phoenix, Yelin Lapidot, and Psagot.
Over 50% growth expected in 2020
RADA published its guidance this week before its financing round, projecting $65 million revenue, over 50% more than its current $43 million revenue guidance for 2019. The company announced in December that it had received a $6 million order, bringing its total new orders in 2019 to $60 million. RADA stated that over 80% of its orders in 2019 were for software-defined radar systems, which the company has marked as its growth engine, while the rest were for its previous avionics solutions.
RADA's revenue grew 52.6% to $30 million in the first three quarters of 2019. The company posted a $1.7 million net loss attributable to shareholders, compared with a $250,000 profit in the corresponding period in 2018.
Published by Globes, Israel business news - en.globes.co.il - on January 9, 2020
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