Monster Digital Inc. (NASDAQ:MSDI) Explodes On Innovate Biopharmaceutical Merger Push

Monster Digital Inc. (NASDAQ:MSDI)

Shares of Monster Digital Inc. (NASDAQ:MSDI) rallied by 161.86% on news that the company had signed a merger agreement with Innovate Biopharmaceuticals. The merger is subject to shareholder approval and will allow Raleigh-based Innovate to become a public company through a reverse merger.

The merger of the two companies comes as a surprise given that the two operate in different sectors. Monster Digital Inc. (NASDAQ:MSDI)’s core competence entails the design and development of data storage and memory products. The company’s products are used in high-performance computing, consumer, and mobile product applications. Some of the company’s primary products include sports cameras and ultra-small xternal mobile drives.

Innovate Biopharmaceuticals, on the other hand, is a clinical stage biotechnology company focused on the development of novel medicines for autoimmune and inflammatory disease. Its pipeline includes drug candidates for celiac disease as well as ulcerative colitis.

Merger Terms

Under the terms of agreement, Innovate shareholders are to receive newly issued shares of Monster Digital Inc. (NASDAQ:MSDI) in exchange for shares they currently own. The agreed exchange ratio values Innovate business at $60 million and Monster business at $6 million.

Once the deal closes, Innovate shareholders will end up owning 91% of the combined company with the remaining 9% going to Monster Digital Inc. (NASDAQ:MSDI) shareholders on a pro-forma basis. Early in the month, Innovate Director of Operations and Investor Relations Kendyle Woodward reiterated that a reverse merger would make the merger less expensive than if they had to file for an IPO.

Innovate management will head the combined company and will operate under the name Innovate Biopharmaceuticals Inc. The combined company will trade on the NASDAQ under a new ticker.

“Management believes this is an exciting opportunity, to fulfill what we perceive is a significant unmet need and an opportunity to bring value creation to the combined company’s shareholders,” said Innovate CEO, Christopher P Prior

Larazotide Acetate Development

The combined company is expected to advance late-stage trial for Larazotide Acetate, which Innovate maintains has the potential to address a significant unmet medical need. Innovate has scheduled Phase 3 clinical trials for the drug to begin in the fourth quarter.

Merging with Monster Digital Inc. (NASDAQ:MSDI) should allow Innovate Biopharmaceuticals to gain access to a wide pool of capital needed to move forward the current pipeline of drugs.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

Lower Lows for Monster Digital Inc (NASDAQ:MSDI)

Monster Digital Inc (NASDAQ:MSDI)

Monster Digital Inc (NASDAQ:MSDI) shares launched in July of 2016. They hit a high that month of $4.15 but less than a year later shares are trading close to 10% of that high. MSDI shares have broken through their worst ever lows and continuing to make new lower lows. Shares traded sideways to slightly higher for much of the end of 2016 and into January. MSDI shares were over $2 in February but since then have been on a continual slide with the only respite being some short covering. MSDI shares have lost over 70% YTD and over 27% for the past month.

Monster Digital Inc (NASDAQ:MSDI)
MSDI chart

For Q1 2017 Monster Digital Inc (NASDAQ:MSDI) reported revenues of $0.95 million versus $1.07 million for Q4 2016. Monster posted a loss in earnings of (-$2.24) million compared to a loss of (-$1.26) million from the previous quarter.

Monster Digital Inc (NASDAQ:MSDI), headquartered in Simi Valley, CA, designs, develops and markets consumer electronics, mobile products and data storage devices. Its most visible product offering is a line of sports cameras. Also in their product portfolio is ultra-small mobile external memory drive products. Both product lines are sold through retailers and distributors.

The company used to be known as Tandon Digital, Inc. but changed its name to Monster Digital in August of 2015.

Monster Digital Inc (NASDAQ:MSDI) shares have never had a profitable year. In 2013 they reported an EPS loss of (-$0.43) followed by yearly losses of (-$1.37), (-$1.08), and (-$1.13) in 2016. Sales peaked in 2014 when Monster Digital Inc (NASDAQ:MSDI) posted a figure of $11.3 million. However in the following years the company posted sales of $8.3 million and $4.1 million for 2016. No analysts are listed by the NASDAQ as covering MSDI shares.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Marc has a degree in economics and a MSc. in Finance. Over his 20-year career, Marc has worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.

Monster Digital Inc. (NASDAQ:MSDI) Banking on Distribution Deals for Growth

Monster Digital Inc. (NASDAQ:MSDI)

Monster Digital Inc. (NASDAQ:MSDI) impressive price run shows no signs of slowing down. Sentiments on the Street have been bolstered by a string of value generating distribution deals in the recent past. The company is fresh from announcing a distribution agreement with Ingram Entertainment Inc. after having signed a similar deal with Petra Industries and announcing expansion plans into Canada.

Ingram-Petra Distribution Deals

Ingram, a distributor of home entertainment products, is now set to start offering Monster Digital Inc. (NASDAQ:MSDI)’s line of action cameras as well as Virtual reality headsets and cameras as part of the deal.

“Ingram Entertainment Inc. is very excited to offer Monster Digital’s products to the retail channel. We feel their cameras and VR headsets will be a great fit for our diverse range of retail partners,” said Ingram Entertainment VP, Tom Blaton.

The deal with Ingram completes a similar deal that Monster Digital signed with Petra industries – also set to make Monster Digital products available in a good number of retail outlets. The deal with Petra expands the company’s distribution channel into independent retailers which has been identified as a key area for growth opportunities.

In a bid to bolster its distribution channel, Monster Digital Inc. (NASDAQ:MSDI) is also in the process of pursuing new opportunities for growth in Canada. The company has confirmed the signing of an exclusive partnership with Curve distribution.

Based in Alberta Canada, Curve Distribution will now start distributing Monster Distribution products. The distributor boasts of a robust distribution channel made up of over 5,000 Canadian retail stores that Monster Digital believes will play an important role in making its products available to the mass market.

Expansion into Canada is part of Digital Monster push that seeks to make its line of action and virtual reality cameras available on the international market. The company is currently working on making its products available in the UK, France, Italy, Finland, and Sweden as it continues to look for ways to bolster sales.

NASDAQ Warning

Separately Monster Digital says it has received a letter from the Nasdaq Stock Market notifying it that its shares not comply with the minimum $2,500,000 stockholders equity requirement. The company has since been given 45 days or until June 1, 2017, to comply with the requirement.

Monster Digital Inc. (NASDAQ:MSDI) is currently working on a number of courses that it hopes will help it regain compliance as required by the NASDAQ requirements.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Monica Gray has an undergraduate degree in Accounting and an MBA – earned with Honors. She has six years of experience in the financial markets and has been a securities analyst for the past two years.