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SANUWAVE Health Surges 42% After Calling For Special Meeting On December 30, 2020; Transformational Events In Play And Guidance Is Bullish

Written by GreenlightStocks

Miami Beach, Florida: SANUWAVE Health (OTC: SNWV) shares rose by more than 42% intraday on Friday before settling back to a gain of more than 28% for the week. Notably, the volume traded at roughly twice its average pace. Investors have been hoping for news that offers a clue as to when the company will be approved to move to a more senior NASDAQ listing. Although that did not come on Friday, the filing may provide subjective insight as to when an uplist may occur.

Also drawing attention is Lake Street Capital’s coverage of the stock that details the company’s potential after its transformational purchase of Celularity’s UltraMIST® ultrasound healing technology device. While their analysis is decidedly bullish, it’s likely the SEC filing made on Friday by SANUWAVE calling for a Special Meeting on December 30, 2020, that attracted investors to the stock, driving prices sharply higher on strong volume. The meeting is being called to vote on two proposed amendments to its articles. Both could be instrumental to helping facilitate a move to a more senior NASDAQ exchange. Moreover, both are valuable for long-term growth.

As noted, two proposals are in play. First, an increase in the authorized share count for the company. Second, the company is asking for approval to effect a reverse stock split at an exchange rate of 1:50. The timing of the filing has captured interest because SANUWAVE is on record as noting that an increase in A/S, and a proposed stock split, would happen only when its uplist is imminent. Shareholders had already approved a reverse split during a July 23, 2020 meeting, but management did not make the change. An increase in the share price may be a pre-requisite to uplist, and a 1:50 split would adjust the share price to roughly $11.50 as of Friday’s close.

In theory, both proposals can be viewed as bullish, and the reverse split, when associated with an uplisting, is a far different action than an uplisting for survival. SANUWAVE does not appear to be in survival mode. In Q3, they posted record revenues with sales increasing by 895% over the same period last year.

Further, street guidance is bullish and expects a second set of consecutive quarterly records for the period ending December 30, 2020. Full-year guidance also sets an optimistic tone, with Lake Street Capital models suggesting revenues can increase by more than 415%, following a near-term Q4 report that anticipates revenues to jump by triple-digit percentages in year over year comparisons. 

Clues to A New Year’s NASDAQ Listing

Investors are always looking for ways to justify their bullish sentiment. SANUWAVE investors are no different and they point to more than Lake Street Capital’s bullish thesis for reasons to be optimistic about the company’s future. A notable projection that investors embrace is street guidance suggesting that the combined revenues from UltraMIST® and SANUWAVE’s FDA-cleared dermaPACE® healing devices can deliver upwards of $25 million.

Projecting revenue at $25 million may not be a stretch. SANUWAVE’s position in the $11 billion diabetic foot ulcer treatment market is strong, and by combining the therapeutic power of each healing device, may have cleared the high hurdles for entry. Clinical evidence of treatment, as well as supporting commentary from treating physicians, show and say that the combined therapeutic value of the two devices delivers the potential to become a best-in-class treatment option for physicians.

Beyond the value of its products to expedite growth, the approval of the two proposed amendments to its articles could provide the means for additional acquisitions, expanding its geographic presence, and broaden its move into Latin markets. Thus, beyond the increase in price to support an uplisting, the increase in shares and a higher share price provide a wealth of corporate flexibility.

Here’s why each proposal, and its respective approvals, are important. 

Effecting A R/S Of its Common Stock 

Ordinarily, investors run from the sound of the words “reverse stock split.” However, SANUWAVE management has been transparent that a reverse split would only occur in association with its planned NASDAQ uplist. Shareholders had already approved an R/S last July, and management didn’t effect the change. Their reluctance to do so showed a commitment to preserving shareholder value and many investors believe the proposal is back on the table for a specific reason beyond increasing the share price. The company’s official version is straightforward.

In its filing, SANUWAVE said it submitted the R/S proposal to its stockholders with the primary and obvious intent of increasing the market price of its common stock. Doing so will enhance liquidity and make its shares more attractive to a broader list of investors. Moreover, they note that a R/S can position the company to attract a more comprehensive range of investors, including a larger class of institutional investors, professional investors, and other members of the investing public. 

The split would also help clear the internal policies that many brokerage houses and institutional investors have in place that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. It’s important to keep in mind that institutional money played a role in the company’s recent transformational acquisitions, and their interest in participating in future growth is likely. Thus, the proposed change in share structure, which does not change a shareholder’s equity position, can create meaningful new interest in the stock. 

And, with an after the event O/S count of only 9.3 million, supply and demand for the shares can help support the post split price. It is also a fair assumption that a NASDAQ uplist is not a “sell the news” event. Thus, the meeting on December 30, 2020, and the subsequent results from the shareholder vote, could have an impact on how the stock trends in January.

Increase In Authorized Shares To Drive Growth

An increase to its authorized share treasury is bullish in most investors’ views since it provides the company with additional flexibility to issue common stock for various general corporate purposes. It’s not an uncommon practice for companies experiencing significant growth to warrant an increase in A/S and especially not unusual after making a company-changing acquisition. SANUWAVE just did.

Further, an increase in treasury shares is only dilutive after they are issued. Thus, investors are wise to consider it an additional tool in the war chest. Further, share flexibility allows for stock splits, stock dividends, raising capital, and can act as currency for further acquisitions and licensing agreements. Although the company noted that it currently does not have any definitive plans, arrangements, or commitments concerning the issuance of the additional shares of common stock, from an investor’s perspective, having available stock is a significant asset for growth.

Both measures come with Board support.

Recap Of Record-Setting Financials

The company’s financial performance has improved significantly since acquiring UltraMIST®. In Q3, the company posted a record-setting quarter with revenues surging by more than 895% compared to the same quarter last year. Guidance for Q4 calls for roughly $3 million in new revenues, which would contribute to a more than 415% gain in year-over-year revenues.  

As part of the pre-acquisition due diligence, investors learned that UltraMIST® delivered more than $15 million in sales last year and provided more than $4 million in EBITDA earnings. Also, the UltraMIST® revenues are immediately accretive and are expected to push the company closer to bottom-line profitability or positive cash-flow status relatively quick. As noted, the street guidance for full-year revenues is $25 million, which would be a substantial increase over full year 2020.

A wild-card in the estimate models is that the SANUWAVE sales force increased to more than 100 people, and they are now trained to represent the company’s FDA-cleared DermaPACE® healing device. When added with UltraMIST®, the two combine to deliver potentially best-in-class painless treatment alternatives to patients with chronic diabetic wounds. Undoubtedly, the value of both devices together played a role in finalizing the UltraMIST® acquisition, and its strength lay in its ability to deliver dual therapeutic value that is quick and virtually painless. They also provide physicians an effective means to treat diabetic wound-care patients along the entire continuum of care. That factor could be a defining advantage over competing treatments.

Sum Of The Parts

The share price rally on Friday came after news was posted. Therefore, it’s logical that investors embraced the call for a Special Meeting. Tangibles that are attracting attention are the record-setting revenues, the potential for a low share count and public float, and an increase in shares that offer flexibility and opportunity for additional growth through acquisition. And while the call for a Special Meeting may offer a potential clue that the planned uplist is imminent, nobody really knows for sure.

But, if the planned uplist does occur soon, the response would most probably be considered extremely bullish in the near and long term. Moreover, with Q4 results expected to deliver a new set of record-setting financials, and with an expansion into Latin markets, momentum could continue into a final approval to uplist. Even on a conservative valuation, the sum of those parts may equate to a much higher valuation than current prices reflect. 

Now, with a full understanding of everything in play, it may be more easily more understandable why the stock went into rally mode.

Media Contact:

ken@soulstringmedia.com

editorial@hawkpointmedia.com

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