Investors appear to be jostling for a slice of MGT Capital Investments Inc. (NYSEMKT:MGT), but what has triggered the excitement? When you look closer, the excitement is predicted on the company’s recent acquisition deal. MGT is in the process of acquiring certain technology and assets from privacy software company Demonsaw.
But it is not just the sheer benefit of adding new assets and technology to its portfolio, MGT has also structured the deal in a manner that means it doesn’t destroy its balance sheet or value for shareholders. For example, the company is not taking any debt to finance the acquisition. Instead, it will issue 20 million common restricted common shares to the owners of Demonsaw. As such, the transaction not only avoids pushing MGT into debts, but also ensures that the newly-issued shares do not immediately dilute its stock.
What is MGT getting in the deal?
According to MGT Capital Investments Inc. (NYSEMKT:MGT), the acquisition of Demonsaw will add to its portfolio crucial technology and assets to help it advance its privacy protection efforts. Internet users are increasingly becoming concerned about the information they share with government entities and corporations online. The technology that Demonsaw brings on board can guarantee MGT users their privacy. People using Demonsaw’s platform can share information anonymously over the Internet, thus bolstering their privacy protection.
Demand for privacy solutions is expected to remain strong amid the rapid proliferation of Internet and mobile in many places around the world. MGT Capital Investments Inc. (NYSEMKT:MGT) is hoping to capitalize on that opportunity with Demonsaw under its armpit.
Upon closing the acquisition of Demonsaw, MGT said Eric J. Anderson will become its new chief technology officer (CTO). Anderson is the founder of Demonsaw and is his a sworn privacy advocate.
What happened in 1Q?
MGT Capital Investments Inc. (NYSEMKT:MGT) finished 1Q2016 with cash and equivalents of about $2.5 million and the company didn’t have any debt on its balance sheet. The company’s internal efficiency drive can also be seen paying off as its cash spending on operations in 1Q declined 49% compared to the previous quarter.