Alien Tech’s Twisty Financing

Connie reported on RFID maker Alien Technologies’ $40 million round with a great deal of skepticism last month, but the round is almost done, according to a regulatory filing.

The company has closed $32.9 million of its proposed “Series 1 Preferred Stock Financing” round from 113 investors, documents show. The company will also fork over $385,763 in sales commissions associated with the raise.

Alien may be the model for what will become an increasingly popular form of late stage financing as a greater number of companies pull their IPOs. Alien filed to go public in April 2006, only to withdraw its offering four months later, in August. Not unlike some 39 companies that have withdrawn their proposed IPOs over the past 9 months.

Yet the filing left me a little confused. And the company’s spokesperson, Catherine Burke, declined to comment.

So I offer you two possible scenarios based on what the regulatory filings say.

Let’s start with what we know:
The company starts raising money immediately after it pulls the IPO in August 2006. It raises at least $10 million from 59 accredited investors between October and December—suggesting the company has been trying to drum up support from angels and other individuals. An accredited investor is anyone with either a net worth of more than $1 million or who earned more than $200,000 in each of the last two years.

In December 2006, it proposes a financing round worth $144 million, broken into a $50 million Series I preferred stock financing, of which the company had already raised $15.3 million, and the sale of $93.75 million common stock warrants.

Here’s where things get sticky and I can’t get any clarification from the company.

(1) The Burning Cash Scenario: The company actually made the $144 million it sought and is now out for another $40 million to replenish its coffers.

(2) The Can’t Drum up Support Scenario: The company never made the proposed $50 million Series I. It closed $15.3 million between August 2006 and January 2007. By March, 2007 it had closed $28.4 million and still had not sold any of the $93.75 million common stock warrants it was offering.

Since then, the original $50 million target of the Series I was pared down to $40 million given the slack demand and the company closed only $4.5 million more. The warrant sale is no longer mentioned, suggesting it has been abandoned.

(3) The Profoundly Confusing Scenario: Alien Tech’s financial situation is something completely different from either (1) or (2).

Here are the filings so you can draw your own conclusions on the company’s post-IPO financing:

December 2006

March 2007

July 2008