Capstone Turbine's Double-Edged Sword

Capstone Turbine Corporation CPST not only announced an offering of common stock, but also preannounced another set of abysmal quarterly results. Capstone Turbine announced Wednesday that it agreed to sell 6.3 million shares of the company’s common stock to an existing and a new investor.

The company said it would issue 6.3 million shares of common stock at about $1.20 per share, along with the option to purchase another 6.3 million shares at an exercise price of $1.34. This is significantly below any price at which Capstone Turbine has ever sold shares to the public.

The gross proceeds from the offering are estimated at $7.5 million and the net proceeds (after deducting fees and expenses associated with the offering), are estimated at $6.8 million. Capstone Turbine intends to use the proceeds partly to fund working capital requirements.

Capstone Turbine’s latest 8-K revealed revenue of $15 million for Q2 FY 2017, down from $17.9 million reported for the same quarter in 2015. New product orders stood at $8 million versus $8.4 million a year earlier. Cash and cash equivalents were $16 million, down from $16.7 million as of the fiscal year ended March 31, 2016.

These results call into question management's revenue growth target of 4-5 percent for FY 2017.

Capstone Turbine’s shares rose 6 percent to $1.11 Thursday morning, but traded recently at $1.07, down 3.6 percent.