How equity lines of credit can destabilize small-cap stock prices
April 5, 2021
Aspire Capital Partners, LLC occupies a specialized niche among investment firms that finance capital-intensive companies. Along with Lincoln Park Capital, LLC, Aspire accounts for over 90% of the equity lines of credit extended to small-cap issuers in the U.S. Both Aspire and Lincoln Park are based in Chicago, and both were founded by former principals of Fusion Capital Partners, LLC, which specialized in equity lines of credit before the firm shut down in 2012. …
Alpha Capital Anstalt has earned a reputation as one of the world’s most prolific and ruthless investors in cash-starved small-cap companies. Its stock-in-trade are bridge loans and private investments in public equity (PIPE) on terms that are highly unfavorable to desperate issuers. Its favorite instruments are convertible promissory notes, convertible preferred shares, and warrants with anti-dilution provisions and registration rights. As long as issuers remain solvent and honor their agreements, Alpha’s investments typically generate handsome returns for the firm while diluting previous investors, increasing a stock’s float, and putting downward pressure on a stock’s price.
During the quiet week between Christmas and New Year’s Eve of 2020, two little-known companies completed a reverse merger that attracted little attention. The acquirer, Ameri Holdings, Inc. (NASDAQ: AMRH), was an obscure tech company in Alpharetta, Ga. The acquiree, Jay Pharma, Inc., was a privately held startup developing cannabis-based pharmaceuticals in Toronto.
The transaction was typical of reverse mergers. Ameri transferred its assets to a newly formed private company, leaving behind a Nasdaq-listed shell. Jay Pharma took up residence in the empty vessel and changed its name to Enveric Biosciences, Inc. (NASDAQ: ENVB). After a one-to-four reverse split, the…
The Activist publishes investigative research on stocks. Nothing we publish is investment advice.