Sangrix Inc. (NASDAQ: SGRX) said it had issued 2,153,257 Class A ordinary shares through earlier debt conversions. The disclosure came in an October 30 regulatory filing after its stock surged 83.51% during regular trading.
The company said holders of its senior secured convertible notes exchanged $3.3 million in principal and $209,807 in accrued interest for the shares at a conversion price of $1.63 each. The transactions occurred between September 30 and October 16, reducing the company’s debt obligations before Friday’s rally.
Conversion Shares Equaled 60.7% of Sangrix’s October 22 Class A Share Count
Sangrix’s amended proxy statement listed 3,545,018 Class A ordinary shares outstanding as of October 22. Shares issued through debt conversions accounted for approximately 60.7% of the reported total.
Issuing new shares to noteholders reduces the percentage ownership of existing shareholders who do not receive additional shares. However, the debt conversions occurred before the October 22 share count, so the 60.7% figure illustrates the scale of the conversions rather than indicating an additional 60.7% dilution after that date.
SGRX closed Friday at $0.7335, up from Thursday’s $0.3997 close, after reaching an intraday high of $1.11. Approximately 79.2 million shares changed hands, more than 400 times the previous session’s volume of 196,495. Despite the rally, the stock finished 47.2% below its October 1 closing price of $1.39.
In after-hours trading, Sangrix shares subsequently fell to $0.6580 by 7:59 p.m. Eastern Time, down 10.29% from the regular-session close.
Sangrix Has $8.44 Million in Convertible Debentures Ahead of Reverse-Split Vote
Sangrix’s October 26 amended proxy statement also disclosed four outstanding secured convertible debentures with approximately $8.44 million in aggregate principal. The debentures could result in additional share issuance, and their conversion terms provide for adjustments in the event of the proposed reverse stock split.
Sangrix is seeking shareholder approval at a November 3 extraordinary general meeting for an eight-for-one consolidation of its Class A and Class B ordinary shares, scheduled to take effect on November 13 if approved.
The company initially proposed a 10-for-1 consolidation in its October 23 filing but revised the ratio to 8-for-1 on October 26. Sangrix said the proposal is intended to help its Class A shares meet Nasdaq’s $1 minimum bid-price requirement.
Under the debenture terms, the reverse split would first trigger a proportional adjustment to the conversion prices. A further reduction would occur on the 16th trading day after the consolidation if a specified market-based price falls below those adjusted conversion prices.
That market-based price is calculated using the average of the five lowest daily volume-weighted average share prices during the preceding 15 consecutive trading days. If the average is below the split-adjusted conversion price, the debentures’ conversion price would be reduced to that lower figure, but not increased under the provision.
Any further adjustment depends on the consolidation becoming effective and the specified market-price condition being met. A lower conversion price would increase the number of shares holders could receive for the same principal amount if they later convert the remaining debt.
