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Siyata Mobile Down 43% Premarket On Stock Offering News – What Next? 

Tim Worstall
Tim Worstall trader
Updated 7 Jan 2022
  • Siyata Mobile produces ruggedised and other specialist mobile telecoms kit
  • Siyata would seem to be in a good market segment
  • The current problem at Siyata is a significant capital raise 

Siyata Mobile Inc (NASDAQ: SYTA) is down 43% at pixel time premarket. The problem is the significant capital raise the company has just done, gaining some $20 million in capital. The Siyata stock price first jumped some 8% on the news of the capital raise but now that has turned and we’ve this next day 43% loss.

The clear implication is that the market liked the idea of Siyata raising more capital to fund activities but is much less happy at the actual price and terms achieved. This always is a problem with capital rises. As with Siyata here, requiring more capital is normal enough, what matters for the stock price is the price that has to be paid for it. We might even think of it as being like that old joke about bank managers, they’ll only lend you an umbrella if it’s not raining. So too with capital raises. If the company really needs the money then the price will be steep, it’s only if it’s not required with any urgency that fine prices can be achieved.

See: The Best Tech Stocks To Buy

Siyata Mobile is a stock we’ve looked at before. It’s in the specialist end of the mobile telecoms market. Ruggedised and similar equipment for drivers, the police and so on. It’s also fairly small, just the announcement of a significant – for Siyata some millions of $ is significant – order can substantially boost the stock price. The market sector seems fine, as with the equivalent one for ruggedised PCs. Some people just do need packaging around the standard electronics which requires specialist design and there often are companies who are such specialists. These markets tend to be rather blocked off from the more general market, technological adaptation is slower and so the electronics itself can often be bought cheap. It’s the packaging that matters, not the diodes and chips that is.   

This particular stock offering though is having that depressive effect on the Siyata stock price. The problem being that back in November it picked up needed capital with a $6 million convertible loan note issue. Well, that’s fine enough. The current stock issue pays off some $4 million of that. So, we might think that this is good, older possibly more expensive money being paid off with newer and cheaper. Which is why perhaps that stock price jump yesterday as Siyata announced the issuance.

What seems to have brought that stock price back down again is reconsideration of the price paid to call in the loan notes plus the discount to the prevailing market price the new stock was issued at. The general market view seems to be that it’s all a bit too dilutive. 

But then that’s the problem, when you really need capital it’s expensive. Further, this also doesn’t solve Siyata’s money needs for the long term. At the last results losses were $10 million, meaning that even if all of the current issuance were devoted to working capital the burn rate still leaves only 6 months on the runway.

It’s possible to be optimistic about Siyata, a few more decent orders and with that half year’s worth of capital they’ll be fine. It’s also possible to be more cautious, thinking that Siyata is going to have to come back for more capital soon enough.

Now the Siyata stock price varies from here is going to depend upon the market balance of those two viewpoints.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.