The Swedish tech startup Tobii recently began the process of resolving on a rights issue of shares valued in SEK 450 million, which amounts to approximately USD 50 million.
The move signals Tobii’s intention to undergo significant investments in the areas of technology and market development. The company looks to profit from the increasing public interest in eye-tracking technology on the smartphone and virtual reality fields.
The press release does not say when the Board of Directors approved the rights issue but reiterates that it is on the table now and subject to further approval by an extraordinary general meeting.
What is a ‘rights issue of shares’?
A ‘rights offering’ (or issue) is a document that gives a company’s shareholders the right to buy additional shares directly from the organization. The shares usually cost less than their current market price, and the sale takes place within a particular period.
This financial strategy essentially means the company goes to the people that already owned stocks from them and offers them the right to buy more shares at a discount for a limited time.
This deal is a right, however, and not an obligation. Beneficiaries can decline the offer or give their rights to someone else.
Large enterprises usually engage in this practice, which translates as a sort of stock market ‘Black Friday’ for a particular industry, when they need to raise money.
The company appeals to investors who already have shares because if they gave that discount to the general public, they would eventually lose money.
“The interest for eye tracking in various consumer applications has developed at a substantially more rapid pace than we anticipated at the time of the IPO [Initial Public Offering] in April 2015,” wrote Henrik Eskilsson, CEO.
Eskilsson added the members of the board were convinced the time is right to expand Tobii’s investment and that there was an excellent chance to create value for the shareholders.
An IPO refers to the initial price put on a company’s shares when they become available for purchase to the general public.
The ‘rights issue’ will take place in December
Tobii is undergoing a time of significant changes. The company has just announced Toby won a design bid with a large smartphone manufacturer, though the article does not specify who.
This new project, in addition to its need to expand into the incipient virtual reality market, is the reason why they are moving onto a rights issue.
The full terms of this financial move, including the new stock prices, have not come out yet but the company states the information could appear as late as November 24. The rights issue would take place from December 6 to December 20.
The extraordinary general meeting that will decide the fate of this financial move will be held on November 30.