The underwriters in plant genomics company Evogene Ltd.'s (NYSE: EVGN; TASE:EVGN) offering on the New York Stock Exchange have exercised their over-allotment options in full, buying shares for $10.6 million. The amount is on top of the gross $74 million raised in the offering of five million shares at $14.75 on Wednesday. The offering was held at a company value of $365 million, after money. Evogene raised much more than the $60 million it planned to raise when it embarked on the process.
Evogene's share price rose 16% on Thursday on the NYSE, closing the offering's discount compared with the share price on the Tel Aviv Stock Exchange (TASE). The share price rose 8.7% by mid-afternoon on the TASE today, to NIS 61.16, despite Friday's 2.8% fall on the NYSE to $16.74, giving a market cap of $159 million.
In his first interview since announcing the planned offering, Evogene president and CEO Ofer Haviv told "Globes" that he was excited by the offering and the amount raised. "During the road show, I felt that investors understood the field," he said. "Everyone has shares in our partners, Monsanto, Syngenta, or DuPont, and for the first time, there was no need to explain what we do. We go directly to the details."
Evogene's partners are seed companies which buy the company's technology to enhance the traits of crops. Haviv said that the support of Monsanto Company (NYSE: MON), which increased its stake in Evogene to 9.8%, after buying $12 million worth of shares in the offering, was one of the critical factors in the US investors' interest in the company.
"Globes": Why did you hold the offering now?
Haviv: "It was a combination of three things: the technology has matured; the wish to enter new fields for which we need to build new infrastructures; and the openness of the US market to offerings. Even without the money raised, we could have moved ahead on our business plan, but much more slowly.
"This is a good time for collaborations between companies like ours and the seed giants, and the faster we progress, the better we can exploit this. Moreover, we wanted to increase our investor base, and obtain exposure to the US market. Regrettably, we were unable to meet demand from Israeli investors, which was greater than expected."
What will you do with $84 million?
"We want to accelerate our current projects and to enter the ag-biotech field to develop biological pesticides more strongly. We want to set up activity in the US to examine the applicability of our technology against American bugs and bacteria that do not exist in Israel, and which we naturally cannot import. This money will allow us to do this.
"Another field is Evofuel Ltd., our biofuel subsidiary. We've had very good results in trials, and we believe that we can reach sales of seeds for the production of fuel in 2016. Whereas we once thought to spin off this activity, to avoid absorbing its financing costs, we now believe that we can hold on to it at least until sales, because that is where the main value creation lies.
"Notwithstanding all this, we want to maintain a low cash burn rate, use our partners' money to finance our research wherever it's possible and logical, and not let the cash reserves blind us. I am a moneyman, and I can promise you that every shekel spent by the company is necessary and documented."
What will be your new cash burn rate?
"That's not yet clear, but it seems that the amount will suffice, and we won't have to raise more capital in the short or even medium term, although surprises are always possible. But from what we see today, we might even break even and stand on our feet before we raise more money."
Evogene isn't there yet; it has no sales and its revenue is payments from its partners to finance research programs.
Monsanto has invested $12 million, but you no longer have a put option requiring it to invest in you at your demand, an option which helped you improve your previous contracts with it.
"We're rather pleased that we cleared out this option and the questions that it would have raised about when and if there would be a dilution in the company. The fact that Monsanto voluntarily invested in us signals the public that the relations between the two companies are solid and stable."
Published by Globes [online], Israel business news - www.globes-online.com - on November 24, 2013
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