Sequans has secured a $50 million financing with existing shareholder Lynrock Lake Master Fund LP to reinforce its balance sheet and continue to develop 5G and 4G chips.
Sequans Communications announced it has secured a $50 million (circa €42 million) financing with existing shareholder Lynrock Lake Master Fund LP to reinforce its balance sheet and continue to develop 5G and 4G chips and modules for massive IoT and broadband IoT.
5G roadmap implementation
With a stronger balance sheet, Sequans said it expects to accelerate its Massive IoT business and engage with potential strategic partners interested in its 5G technology.
The France-based company recently introduced the second generation of its 5G-ready Monarch (LTE-M/NB-IoT) and Calliope (Cat 1) platforms that are recognized worldwide as massive IoT solutions. Sequans is also developing its 5G Taurus broadband IoT platform, expected to be introduced at the end of the year.
“The new financing allows us to feel secure that we will continue to be able to execute on our product roadmap, including our 5G development,” Deborah Choate, Sequans’ CFO, told EE Times Europe.
For all financing agreements, the timing has a strategic dimension. “In addition to allowing us to retire more expensive debt, having a strong balance sheet now allows us to feel comfortable dealing with any surprises from the current industry-wide component shortage and related supply chain issues, as well as derisking our sustained product development program, particularly for 5G.”
Choate added, “Nearly $20 million will be used to retire existing debt coming due within the next twelve months with higher interest rates: the nearly $12 million of existing 7% convertible debt due April 14th, 2021, if not converted, and nearly $8 million of 9% venture debt.” The rest is for general corporate purposes.
The $50 million financing includes the sale of $10 million of American Depositary Shares (ADS) priced at $5.50 per ADS and $40 million of convertible debt that converts into the company’s ADS at a conversion price of $7.66.
The financing closed on April 9th, 2021, as planned. “We made a filing with the Securities and Exchange Commission today [April 12th] to confirm this,” Choate noted.
Lynrock Lake Master Fund LP is an existing shareholder, but it is not known when it first invested in the company. “An investment in Sequans was not disclosed in their public filing as of December 31st, 2020, so we can assume they began investing in 2021,” said Choate. Similarly, the total capital that Lynrock Lake Master has invested in Sequans has not been publicly disclosed yet.
When asked if, with the $50 million financing, Lynrock Lake Master is now the main shareholder, Choate said the investment management firm “has a contractual limitation that means that it cannot hold more than 9.99% of the outstanding shares of the company. However, this would still make them our largest shareholder, along with Bpifrance and another U.S. institutional investor (each of which owns over 9% of the company).”
In January, Sequans received a multi-million dollar grant from the French government. The company will indeed lead a consortium of French companies (Amarisoft, Alsatis, AW2S, SNCF, ITNOVEM) and a technology research institute (CEA-Leti) whose mission will be to develop 5G technology solutions for critical IoT applications in industrial, medical, scientific, and other markets.