There appears to be some confusion among Artrya shareholders regarding what they’re voting for in the upcoming General Meeting, scheduled for 24th October.
The three resolutions relate to the group’s recent $75 million placement. Artrya completed the initial $60 million placement by utilising the group’s ability to issue shares up to 25% of its existing outstanding shares, without requiring shareholder approval. Only the third Resolution seeks approval to issue the 7.2 million shares of Tranche 2 ($14.7 million). And, as outlined below, even if the third Resolution doesn’t pass, if either of the first two Resolutions passes, the company can still issue the Tranche 2 shares (see Table 2 for outcome summary).
Under listing rule 7.1, a company may issue up to 15% of its issued capital within a 12-month period without shareholder approval. Listing rule 7.1A (which applies to small caps outside the ASX300 and with a market capitalisation of less than $300 million) allows companies to request shareholder approval to increase this limit to 25%* . Artrya shareholders approved this additional capacity at the AGM in November 2024.
Artrya is using this 25% allowance to issue the first tranche of 29.4 million shares (see Table 3).
Under listing rule 7.4, a company can request shareholders to approve a share issue after the fact, thereby refreshing the company’s 15/25% capacity. This is what resolutions 1 and 2 relate to (see Table 2).
* Share purchase plans (SPP) do not count towards this limit.
Resolutions 1 and 2 request shareholder approval to issue 29.4 million shares ($60.3 million), thereby resetting the limits set by Rules 7.1 and 7.1A. If passed:
The outcome of Resolutions 1 and 2 won’t affect this raise, but will determine if the company can issue further equity in the coming 12 months without shareholder approval.
While Resolution 3 requests shareholder approval for Tranche 2 ($15 million, representing 6% of the issued capital), even if it fails, as long as either Resolution 1 or 2 passes, the company can still issue the shares.
Given that approximately 40% of the shares outstanding following the issue of the first tranche of the placement shares are owned by insiders (~14%) and placement recipients (25%, with Regal Funds Management controlling approximately 7.8% of the total shares), we expect all resolutions to be approved.
Therefore, Tranche 2 will proceed unless shareholders reject all three Resolutions.
The company does not need permission to undertake a share purchase plan (SPP). The issuance is not included in the 7.1 and 7.1A restrictions but is limited to $30,000 per shareholder within a 12-month period.
As expected, Artrya provided little granularity on how it will use the raised funds, listing almost every cost line item in its market announcement:
“Placement proceeds to be applied to support accelerated U.S. commercialisation and expansion, customer success and support, market access and reimbursement enablement, product development, research & development and working capital.” – Artrya Limited
It’s also not yet clear at what rate management intends to increase spending. In FY24 and FY25, total operating costs were $16.1 million and $20.9 million, respectively. At the full-year results, AYA confirmed its intention to be cash flow positive by FY27.
Given the group’s historic rate of spending, it’s difficult to imagine the company burning through $80 million in cash within the next two years. No doubt this question will be raised at the shareholder meeting in October.
As discussed previously, Salix Coronary Anatomy presents an incredible opportunity to embed the Salix platform into customers’ operations and workflows, thereby creating a highly sticky product from which the company can continuously roll out new products.
With proper execution, driven by an experienced US-based team, AYA could meaningfully accelerate rollout and thereby secure meaningful long-term revenue and shareholder value by allocating an appropriate share of the funds raised to these activities. This growth would likely be best led by an experienced US healthcare sales/growth executive, building on the relations and credibility already generated by Artrya’s senior management team within the US healthcare sector.
We look forward to gaining great clarity in the coming months.