GI Dynamics' weighty capital raising

What a difference five weeks can make. It’s just enough time for GI Dynamics (GID) to go from zero to $60 million.

It’s the intestinal liner developer’s capital raising I am referring to. When I caught up with GID’s US-based chief executive, Stuart Randle, when he was in Australia in late May, he told me the “road show” was just to catch up with shareholders and denied that GID was looking to raise capital.

GID is asking for a pretty big amount too as the fresh capital injection would represent close to 50% of the company’s $150 million market cap, but GID doesn’t seem to have any problems drumming up interest as sophisticated investors have already committed $57.5 million via a private placement.

GID is turning to existing shareholders to tip in another $2.5 million via a share purchase plan at 53 cents a new share, and I think shareholders will be very supportive.

The equity raising does make sense as it will help fund GID’s important pivotal trial in the US to prove that its liner can be used to help diabetics in that country.

This isn’t the only profit avenue for GID. The company is already targeting the weight loss market and its product has been approved for use by diabetics in a number of countries. 

GID announced last week that it has appointed a Middle East distributor for the product and CIMB is excited about the large opportunity for GID in that region. 

GID’s product is essentially an intestinal condom with a hole at each end. This prevents food from being absorbed through part of the intestines.

The broker is urging investors to buy the stock with a target price of $1.85, although that could be revised down to account for the capital raising. The stock last traded at 59.5 cents.

GID is a member of the Uncapped 100.