EBR Systems (ASX:EBR) executives used an investor webinar to clarify details around a proposed common stock share consolidation that will be put to shareholders at a special meeting scheduled for Thursday, March 12. Chief Executive Officer John McCutcheon said the company issued an announcement the prior day and expects to post the notice of meeting online “on or around” January 28, along with voting instructions.
Clarifying CDIs versus common stock
McCutcheon said the company had received questions and emails indicating confusion about what securities would be affected. EBR’s ASX-traded securities are CHESS Depositary Interests (CDIs), which provide the economic benefits of ownership and trade like other ASX-listed securities. CDIs are convertible into EBR common stock on a one-to-one basis, with the company holding one share of common stock in reserve for each CDI.
Proposed consolidation range and why it is being sought
The proposal seeks shareholder approval for a reverse consolidation of common stock within a range of 5-to-1 up to 20-to-1. McCutcheon said the proxy vote would approve the range, with the board determining the final ratio at a later date. He added there is no set timeline for when the board would implement the consolidation after receiving approval.
The stated purpose of the action is to address limitations tied to the company’s authorized share count, a U.S. corporate structure concept that McCutcheon said is not common in Australia. As a Delaware corporation, EBR’s charter permits up to 600 million authorized shares of common stock. McCutcheon said the company currently has about 524 million common shares “accounted for” through a combination of shares held by common shareholders, shares reserved to back CDIs, and shares reserved for warrants or options. That leaves about 76 million shares available under the authorization.
Management and the board, he said, do not believe that remaining capacity is sufficient for the company’s future needs, including potential financings and strategic uses such as acquisitions or intellectual property purchases. A consolidation of common shares would reduce the number of common shares outstanding or reserved, freeing up additional authorized capacity while keeping the authorized limit unchanged.
Why ASX investors’ CDI holdings are intended to be unaffected
McCutcheon repeatedly stressed that ASX investors should not see a direct impact on their CDI holdings from the consolidation. Under the plan, EBR would change the CDI-to-common conversion ratio proportionately at the same time it consolidates the common stock. This adjustment is intended to keep the economic value and trading price of CDIs unchanged purely as a mechanical result of the consolidation.
Using an example based on the prior day’s closing CDI price of AUD 1.02, he said that, regardless of the consolidation ratio, the number of CDIs outstanding would remain the same and the CDI price would not change because of the consolidation. The company’s slide deck example showed CDIs remaining at 449.5 million across the different consolidation scenarios, while the number of outstanding common shares would decline and authorized capacity would increase.
- Available authorized common shares: approximately 76 million before consolidation.
- After a 5-to-1 common consolidation: approximately 495 million available shares.
- After a 10-to-1 common consolidation: approximately 547 million available shares.
- After a 20-to-1 common consolidation: approximately 574 million available shares.
McCutcheon also addressed a question about whether early investors holding common shares would benefit at the expense of CDI holders. He said they would not, because the reduction in share count would be offset by a proportional increase in per-share value, leaving total value unchanged.
Not tied to a U.S. listing or an imminent capital raise
Responding to investor questions, McCutcheon said the consolidation is not being undertaken to support a Nasdaq or New York Stock Exchange listing, and shareholders would not need to change trading platforms. He said there are no current plans for a U.S. listing, no active financing underway, and that the proposal is “merely preparatory” to maintain flexibility for future capital needs.
He added the company chose to pursue the action via a special meeting rather than waiting for the annual general meeting (which management indicated is in late April) because it wanted to complete the process sooner. He also said increasing the authorized share limit would likewise require shareholder approval, but the company preferred consolidation rather than increasing the authorization, citing Delaware fees tied to authorized share counts.
Other investor questions: TAM update
During the Q&A, management also addressed an unrelated question about a recently updated total addressable market (TAM) figure. McCutcheon said about half of the increase came from raising the assumed U.S. average selling price per system from $45,000 to $55,000, which he described as still conservative. The remainder was attributed to growth in the leadless pacemaker upgrade segment, which he described as a “funnel market” that is expanding EBR’s opportunity.
McCutcheon encouraged shareholders to vote in favor of the proposal, noting that approval requires a majority of all shares outstanding, and invited investors to contact the company if they needed additional clarification.
About EBR Systems (ASX:EBR)
EBR Systems, Inc develops implantable systems for wireless tissue stimulation. The company offers WiSE cardiac resynchronization therapy system that uses a proprietary wireless technology to deliver pacing stimulation directly to the inside of the left ventricle of the heart. Its products are used to eliminate lead complications, such as placement difficulty, unintended nerve stimulation, dislodgement, extraction, and repositioning. EBR Systems, Inc was incorporated in 2003 and is based in Sunnyvale, California.
