Last week a reader drew our attention to the refinancing conditions for Poxel, a Paris-listed biotech company that has been under judicial administration for about ten years now. The press release outlining the operation's characteristics is unequivocal: it's either the proposed plan or liquidation. And for the proposed plan to be implemented, it requires shareholder approval at the December 11 general meeting, which explains the communications setup, notably a dedicated webinar.

To be perfectly explicit, this is a survival operation. Poxel avoids judicial liquidation thanks to its existing creditors (IPF and IRIS), which take control of the company's finances. The structure is extremely dilutive for current shareholders, and the terms of the new debt are very onerous.

A double, massive dilution

The plan rests on a balance-sheet cleanup and a cash injection, structured in three simultaneous steps, subject to AGM approval:

  • Capital Increase with retention of the DPS: open to all, guaranteed by IPF. It's a market call for "fresh cash".
  • Reserved Capital Increase (IPF): IPF converts part of its existing debt into shares to reach 29.9% of the post-operation equity (just below the take-over threshold).
  • FINANCING IRIS (Equity Line): a funding tap via convertible bonds/stock warrants to ensure working capital on an ongoing basis.

The company plans to move to Euronext Growth to reduce costs and regulatory burdens.

Fundraising at usurious debt terms

The financial terms reveal the company's distress. There is no surprise about the proposed fundraising discount, nor about the transformation of IPF's debt into equity. By contrast, the terms of the new IPF loan are extraordinary:

  • Capitalized interest rate: 35%,
  • Commitment fee: 10%,
  • Exit fee: 13.7%.

If the balance sheet is pried open on one side, it will soon be weighed down on the other with this new, usurious debt. With a streamlined cost structure, Poxel has bought about 12 months of survival. The money is merely to keep the lights on long enough to sign a contract in Asia. Otherwise, the interest level will render the situation untenable.

To guard against another misstep, IPF places the intellectual property in a trust that (for its benefit) will limit damage. And if there's success, the lender benefits from guarantees on part of future revenues, up to a ceiling. Its risk is thus far better managed than that of a typical shareholder. But that's the game: in a desperate situation, desperate terms.

Old acquaintances

Poxel's case is not isolated on the list. The roster of zombie-like companies that only survive thanks to dilutive financing lines continues to grow. One could think the regulator is trying to carve out an autonomous section for them.

Haffner Energy recently announced the draw of a second tranche of 60 OCEANs on its new line granted by Alpha Blue Ocean, the market leader in the field. Haffner, which has not even reached its third year as a listed company, has lost only 94% of its value since the start of the year, as the shares issued from the financing are created and sold. The stock has nevertheless risen twice in the last 23 sessions.

Europlasma, meanwhile, drew 200 OCA on the line granted by its old ally Alpha Blue Ocean. This enables the company to keep living quietly on its liquidity, at the market's expense. It's still unclear whether 2025 will be a better year for shareholders than the two preceding ones. With a current drop of -99.45%, it sits between -99.24% in 2023 and -99.86% in 2024.

Bottom line: individual shareholders must steer clear of companies that have sunk into dilutive financing, except possibly for pure trading. And even then...