As expected, GigCapital, Inc. (GIG) announced this afternoon its intention to do a cash tender offer for its outstanding Rights. This comes on the heels of GIG previously tipping off investors that it wanted to do something about its Rights when GIG announced back on August 19th that it had begun it’s “de-SPACing” process. At that time, the press release included the line, “…the Company may choose to engage in various activities such as raising equity….and strengthening its future liquidity and financial position, including with regard to its outstanding Rights.“ Sure enough, post-Labor Day, we have a Rights tender.
However, we won’t know the terms of the tender offer until GIG files its definitive proxy (per SEC regulations), but since GIG also stated that they expect to close this transaction in the fourth quarter of 2019, and the fourth quarter is still a month away, we might have to wait a bit to find out those details. They could file as quick as a few weeks or as long as a few months.
What we do know right now is, the Rights are currently trading at $0.45, which, at 1/10 implies Rights holders are valuing the Gig/Kaleyra transaction at $4.50. So what will GIG pay for that cash tender of Rights? Well, if they offer anything below $1.00, they are kind of implying that the company is worth less than $10.00 per share. But with 14,375,000 Rights outstanding, a tender at $1.00 means Gig would be paying $14.4 million total.
So going back to the the August 19th press release which stated, “the Company may choose to engage in various activities such as raising equity….” perhaps an additional financing is in the works to help pay for the tender offer of Rights. However, they don’t necessarily need to do a PIPE. They could also just increase their borrowing capacity. We just don’t know yet. Basically, we have a lot of blanks that still need to be filled in, but for now, a cash tender for the Rights is a step in the “right” direction.