Home » Business

Local Bounti Rises As Insider Charles Schwab Backs PIPE Offering With Significant Equity

Published on

Discusses terms of the equity offering, insiders who participated and some additional analysis

Advanced local indoor produce grower Local Bounti’s (NYSE:LOCL) shares marched higher on Wednesday rising 17.09% as the release of several Form 4’s to the SEC for the stock sparked a flurry of buying activity.

Get The Full Henry Singleton Series in PDF

Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q3 2022 hedge fund letters, conferences and more


Find A Qualified Financial Advisor

Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes.

Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.

If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now.

The purchase transactions for several insiders revealed the participants of LOCL’s $23.3 million PIPE (public entity investment) offering that was announced by the company on Monday. One of these insiders was well-known investor Charles Schwab.

Local Bounti's PIPE Offering

Local Bounti’s PIPE offering was announced at the beginning of the week in order to secure additional funding to support the continued scale-up and build of its Controlled Environment Agriculture ("CEA") facilities that leverage its proprietary Stack & Flow Technology.

The technology is used to improve crop turns, increase output and improve unit economics.

As part of the private placement, the company issued about 9.3 million shares at the offering price of $2.50 which is a 22% discount to Wednesday’s $3.22 closing price.

On Tuesday, insider Charles Schwab disclosed to the market that he backed Local Bounti’s push to expand by subscribing to 3 out of the 9.3 million shares that were on offer representing one third of the offering.

The total commitment was worth $7.5 million and boosted Schwab’s total share count to roughly 14.8 million or bringing total float ownership to ~14.2% post share issue.

Other insiders that contributed to the equity raising included (share count subscribed for):

  • Chairman, Co-CEO and Founder Craig Hurlbert - 40,000 shares
  • Co-CEO and Founder Travis Joyner’s spouse - 40,000 shares
  • CFO Kathleen Valiasek - 40,000 shares
  • Board member Matthew Nordby - 40,000 shares
  • General Counsel Margaret McCandless - 20,000 shares
  • Insider Edward Forst - 100,000 shares

All of these insiders contributed to Fintel’s bullish officer accumulation score of 93.97 which ranks LOCL currently in 37th spot when screened against 11,615 other companies.

The score ranks companies based on the highest levels of officer buying activity with their own money.

During the last update to investors in August, LOCL reported revenue from operations of $6.3 million which came in ahead of market forecasts.

The group's adjusted EBITDA loss widened from -$3.5 million in 2021 to -$7.9 million in the second quarter. The net loss also widened substantially from -$7.6 million to -$31.7 million.

The losses have been associated with the company’s ramp up of operations which is helping scale revenue as it increases production output of food.

Management at the result reiterated to investors that they expect to generate at least $20 million in sales for the full year.

Analyst Ben Klieve from Lake Street capital markets told investors that as sites move from construction/retrofit to production that the facility economics argument will become clear and valuation upside should follow through.

Klieve thinks that the share price weakness has been mostly related to weak de-SPAC and growth markets.

The firm remains positive on the company with a ‘buy’ call and $15 target price.

Even though the stock is only going to generate sales over the year of $20 million which is relatively small compared to its ~$300 million market cap, management will attract investor support if they can prove the high margin returns the company can make compared to traditional food production methods.

LOCL has a consensus ‘buy’ recommendation across the market with an average $10.20 price target which is back at the original SPAC merger price.

Article by Ben Ward, Fintel