Quantum seeks to strengthen balance sheet with SEPA share sale deal

Nasdaq-listed storage player Quantum has struck a standby equity purchase agreement (SEPA) with Yorkville Advisors Global.

The deal will give Quantum access to additional equity capital and liquidity. Limited initially to 1.157 million shares, any further issuance requires shareholder approval.

A SEPA is a financial arrangement used by publicly listed companies to raise capital by selling shares to private investors over time. A company can “call” on the investor to purchase equity on an “as-needed basis,” up to a certain limit.

Unlike traditional capital-raising methods that may involve an immediate large issuance of shares, a SEPA provides more flexibility to the entity seeking funding, allowing companies to sell shares when needed and at times that are advantageous, such as when the market is more favorable.

Under the Quantum/Yorkville Advisors Global arrangement, Quantum has three years to access the full SEPA amount.

Jamie Lerner, Quantum
Jamie Lerner

“This strategic financial partnership provides Quantum with the flexibility to support our ongoing operations and accelerate our growth initiatives,” said CEO Jamie Lerner. “We have solidified access to significant capital, which, over time, will be used to strengthen our balance sheet and enable us to focus on executing our vision of revolutionizing data management solutions for the AI industry.”

Lerner added: “Quantum has made substantial efforts over the last year to improve our operational and financial health through a combination of revenue and margin improvement plans, financial and organizational restructuring, and cost reduction initiatives. In addition, we have been exploring several strategic alternatives to pay down our currently outstanding debt, which would also help to lower our cost structure, including lowering the interest expense and other fees the company has incurred.”

The agreement with Yorkville is initially limited to 19.99 percent of outstanding shares, or no more than 1,157,139 shares of common stock under the purchase agreement. Shareholder approval is required to exceed this share limit. The company’s share price at close on January 30, 2025, was $22.45.

The per share price Yorkville will pay for any shares will be dependent on the one or three-day pricing period elected by the company at a discount of either 3 or 4 percent. Quantum says any proceeds received from these sales will be used for “working capital and general corporate purposes,” including the repayment of debt.

Quantum is expected to release its third quarter earnings after the market closes on Sunday, February 2, 2025. Analysts expect Quantum to post earnings of $0.84 per share, and revenue of $72 million for the quarter. In the second quarter, ended September 30, 2024, revenue was $70.5 million.

Earlier this week, Quantum announced scalability enhancements to its Myriad all-flash file system, offering incremental, in-place system scaling with dynamic, automatic data leveling.