You may recall the loss-making smart-glass manufacturer View Inc. that my colleague Hayley Cuccinello and I have chirped on about for almost a year now.
Well, it is still burning through cash. View incurred $21 million in R&D costs in the second quarter and $41 million in expenses because of legal, consulting, and accounting expenses related to an audit conducted last November. This was against $33 million in revenue for the first half of 2022.
But importantly, View is again in need of capital. This month, the glass maker said it inked a $100 million common stock purchase agreement — think of it like a line of credit in exchange for more equity in the company — with Cantor Fitzgerald.
View also said it sought up to $200 million in convertible notes. Similar to the $100 million agreement outlined above, convertible notes are like a bond that the holder can switch to equity in the company at a later date.
To help dissect convertible debt, I spoke with Michael Miller, president and chief investment officer at Wellesley Asset Management, and a fan of all things convertibles.
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1. Startups that rode the special-purpose acquisition company wave are turning to unique forms of capital raising for cash. View and electric-truck manufacturer Nikola have tapped into equity lines of credit, and explored convertible debt deals.
Convertible debt can be crucial lifelines for companies low on cash. Investors like the upside of getting in with a company that may have little choice but to issue a convertible bond at a greater interest rate than what an investor could find elsewhere in the fixed-income markets.
Yes, investors are assuming more risk, but the hope is that a former Silicon Valley darling will blossom again once the public markets heal, or the company eventually turns a profit (fingers crossed).
"If I'm a CFO and I want to issue $100 million in convertible bonds, and if my company says it's going to do what it promises, then no one is going to knock on my door and ask for money back. They're going to end up converting that bond into stock," Miller told me.
To be sure, issuing new stock for these convertible bond holders-cum-shareholders will dilute existing equity owners, and that doesn't always end well (just ask Facebook co-founder Eduardo Saverin). But doing it with an unprofitable company during a market rebound can be rewarding for existing equity investors who have enjoyed a bump in the share price.
"Yeah, I might dilute stockholders, but I'm not diluting them at $10 a share, it could be $30 or $40, and that makes the CFO look like a rockstar," according to Miller.
For View, right now, that thought might be wishful thinking. We will see.
The company said it has signed a non-binding term sheet with a "prospective lead investor" for convertible debt, but it's still burning cash, and has not really moved the needle on reaching profitability.
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Done deal:
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Curated by Aaron Weinman in New York. Tips? Email aweinman@insider.com or tweet @aaronw11. Edited by Hallam Bullock (tweet @hallam_bullock) in London.