Great origin story, poor financial outlook

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Since its IPO about seven years ago, shares of ReWalk Robotics, a supplier of robotic exoskeletons based in Marlborough, Massachusetts, had fallen about 99.7% as of September 24.

But this week, ReWalk, 49 employees, was the fourth busiest stock in the United States, according to Trading view, as it climbed 56% to a market cap of $ 100 million.

With an active bullish discussion on stocks on Stocktwits, is it too late to take the ReWalk train? I see three reasons to avoid this stock:

  • Holds out of range and blurs to avoid radiation
  • Weak financial outlook
  • Dive short of interest

(I have no financial interest in the securities mentioned in this article).

The great founding story of ReWalk Robotics

ReWalk Robotics has a very compelling story – tinged with sadness. Dr Amit Goffer, an electrical engineer with a doctorate in physics, started ReWalk in 2002 “after becoming quadriplegic from an accident,” CEO Larry Jasinski told me in an interview in November 2015.

Goffer created the company to take charge of his life and exercise his technical talent. “Put simply, he wanted to regain much of what he had lost by becoming paralyzed. He was looking for independence, something that he could use in almost any environment and that he could wear all day. [To that end, ReWalk created its] exoskeleton for paraplegics. We allow a completely paralyzed individual to walk around the community, at work, at home or at least in everyday life.

In September 2014, ReWalk went public at $ 12 per share, selling three million shares worth $ 136 million. Factoring in a 25 or 1 reverse stock split in April 2019 (which would convert, say, 100 shares into four), the ReWalk share price fell from $ 775 to $ 2 per share over the past seven last years.

Out of reach of expectations and confuses to avoid radiation

In the five years since I first interviewed Jasinski, ReWalk’s revenue has mostly declined from $ 5.5 million in 2016 to $ 7.8 million. in 2017, before dropping steadily to $ 4.4 million in 2020.

ReWalk has been more creative and has been successful in raising capital than developing products that increase its market share and revenue.

For example, in august 2016, ReWalk forecast revenue for the year in the range of $ 6.2 million to $ 7 million based on a program that would convert many customers from a purchase price of $ 77,500 for its exoskeletons to a $ 3,000-per-month rental contract for which he hoped to recruit a business insurance that would cover the costs.

Sadly, ReWalk’s $ 5.5 million revenue fell 17% from the midpoint of its 2016 revenue forecast. But the company was optimistic that a combination of a line of $ 20 million credit at 10.75% interest rate and additional share sales would allow it to continue despite a cash depletion rate of $ 28 million in the year ending in June 2016.

In November, ReWalk hoped to raise capital by convincing investors to buy up to 3,250,000 units – one common ReWalk share and 0.75 of a warrant to buy one common share with an exercise price of 4. , $ 75- at $ 3.75 each.

This was disappointing for investors and in December 2016, the Nasdaq informed ReWalk that it was violating the minimum market capitalization requirement of $ 50 million to maintain its listing, giving ReWalk six months to come into compliance.

In November 2018, ReWalk announced that it had again received a notice from Nasdaq that it had failed to comply with a lower market capitalization requirement of $ 35 million or at least $ 2.5 million. equity dollars.

In February 2019, ReWalk completed a follow-up public offer and two months later it closed a direct share offer and a private placement of warrants to purchase its common shares. In March 2019, ReWalk completed a 25: 1 reverse stock split.

It all worked. In April 2019, the Nasdaq ruled that ReWalk was back in compliance with its $ 2.5 million capital listing requirement.

In March 2020, his registration was again in danger. It was at this point that the Nasdaq informed ReWalk that its stock price had fallen below $ 1 in the previous 30 days and that the company had until September 2020 to exceed its stock price. share above $ 1 for 10 consecutive business days.

The following month, ReWalk shares started trading above $ 1 per share and have stayed there ever since.

Weak financial outlook

ReWalk’s latest financial results showed declining revenues. Specifically, ReWalk’s second quarter revenue fell 17.6% to $ 1.4 million in revenue primarily due to fewer units sold of its Personal 6.0 product in Europe. CFO Ori Gon told the company’s investors. conference call.

I can’t find any predictions or tips for ReWalk. However, Jasinski is optimistic about the future of the company. In a September 21 interview with TWST, he underlined the demand in Germany where “their coverage is the most complete”.

He also sees potential in the United States because of what he said is a “national coverage policy with the VA.” So veterans in the United States have access to these products. Over the next 12 months or so, he plans to sign a contract with the Center for Medicare Services (CMS) with an established price and category.

He attributes the slow pace of market adoption to the need to educate people to understand and decide how to use what he considers “disruptive technology”. It is also optimistic that due to Covid-19, medical users and payers see the benefit of being able to manage and improve health at home.

Of course, the company is not in imminent danger of running out of cash. After more than tripling its cash balance in the first quarter of 2021, ReWalk – which spent $ 3.2 million in operating cash in the second quarter – ended June 2021 with approximately $ 64 million in cash.

So why doesn’t ReWalk match Jasinski’s bullish words with a bullish earnings forecast?

Short interest plunging

With no information on market developments filed with the SEC this month, it’s hard to see what drove ReWalk shares up 56% this week. Investor place attributes the rise to “a short press [prompted by] a typical case of social media traders coming together to push stocks higher. “

Certainly a poster on Twitter thrilled to squeeze short sellers. SmartRocketTrades @SmartTradesWin tweeted: “$ RWLK ReWalk Robotics watches shorts burn” on September 21, the day its shares nearly doubled to $ 2.59.

However, there is very little short-term interest in ReWalk stocks. According to the Wall Street newspaper, short interest has fallen from around 50% to just 0.26% of its free float as of September 15th.

So how can frenzied short coverage explain its headline rise?

When investors can buy shares of companies with more than 100% revenue growth per year, why would they want to own shares in ReWalk?


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