Monday, April 8, 2024

Asensus Surgical: LOI with Buyer, Highly Speculative

Similar to MRDB, this is pretty speculative.  Asensus Surgical (ASXC) (~$73MM market cap) is a cash burning medical device company that makes robot systems for abdominal surgeries.  Asensus has one surgical system in the market (Senhance Surgical System) and a next generation one in development (LUNA System), unfortunately for the company, they're reaching the end of their cash runway in June, per their own forecast, leaving them in a tricky spot needing to raise capital.

In comes Karl Storz SE, a privately held but sizable German medical device company, with a letter of intent to purchase Asensus for $0.35 per share (versus a $0.27 share price today), or roughly a $95MM equity check.  Karl Stroz is also providing Asensus up to $20MM in a bridge financing to ensure the company has enough capital to make it to closing.  The two are now in an exclusivity period and have ten weeks from 3/28 (6/6 by my math) to reach a definitive agreement.  The loan distributes $1MM per week during that period and then $10MM on the signing of a definitive agreement.  The spread here is pretty wide (~30%), because if Karl Storz backs away during this due diligence period, Asensus is either a zero or would need to raise equity in a punitive way.  Since Karl Storz is now the senior lender, similar to MRDB, the tin hat wearer in me thinks there's a risk they could torpedo the deal and get Asensus on the cheap in distress since any other buyers are shut out during this 10 week period.  There's also a non-small chance that they recut the deal for a lower price.

But Karl Storz is a legitimate buyer, most of Asensus Surgical's systems are installed in the European market, they likely have a fair amount of knowledge of the assets they're buying.  This is a hard idea to size, unless you know something about the product/science (if you're one of these people, please share your thoughts below), as its challenging to handicap if this deal will go through.  I added a small position.

Disclosure: I own shares of ASXC

Monday, April 1, 2024

MariaDB plc: In Default, Highly Speculative, 3 Bidders

This is highly speculative, but I wanted to bring the discussion out of the comment sections of my BFIN post as I found the situation interesting enough to initiate a small position.

MariaDB plc (MRDB) ($32MM market cap) offers enterprise and premium functionality on top of the open sourced (free) MariaDB Community Server database management system ("DBMS").  To distinguish between the company and the open sourced DBMS, I'll refer to the for-profit company itself as MRDB and the DBMS as MariaDB.  The lead developer of MariaDB is Michael "Monty" Widenius who was one of the original developers of MySQL, which was sold to Sun Microsystems, Widenius developed MariaDB in response to concerns following Oracle's acquisition of Sun Microsystems in 2009.  Widenius owns less than 1% of MRDB and is no longer a director/employee of the company itself.

MRDB was a 2022 deSPAC, it announced the definitive agreement with Angel Pond Holdings (POND) on 2/1/22, valuing MRDB at a headline $672MM or a lofty 14x revenue.  Between deal announcement and closing, the market's appetite for risky SPACs changed, upon closing in December 2022, the trust delivered minimal cash to MRDB as over 99% of POND holders redeemed.  Unsurprisingly, cash flow negative MRDB quickly ran into trouble and as of this January, MRDB was in default of their $26.5 promissory note to RP Ventures.  RP Ventures put restrictive covenants in their loan documentation that prevents MRDB from doing almost any major corporation action, including a change of control, without their consent.  Fortunately, MRDB does have several bidders circling looking to acquire the company in whole for cash:

Here are the players, shares trade for $0.45/share today:

  1. Runa Capital (a related party to RP Ventures, also a 7.8% stockholder) made an offer for $0.56/share, later withdrew the offer and provided debt financing instead
  2. K1 Investment Management (PE firm, SaaS focused) made an offer for $0.55/share
  3. Progress Software Corp (PRGS, $2+B market cap) made an offer for $0.60/share
Basic timeline thus far:

The entry of Progress Software as a late bidder somewhat validates that there is value here, but RP Ventures/Runa continue to be hostile to this process, potentially trying to force the company into bankruptcy where as the senior lender they'd be there to pick up the pieces on the cheap.  This is a situation similar to Armstrong Flooring (AFI) from a couple years back where the company's lender gave it a few months to find a deal, there appeared to be equity value (to me at least), but ultimately AFI was zeroed out in bankruptcy.  The appointment of a CRO flags to me that MRDB could face a similar fate.  Either way, due to Irish takeover rules (MariaDB is Ireland domiciled), we should find out soon.

Disclosure: I own shares of MRDB