Under the terms of the transaction, the international investment firm purchased 50,000 shares of Syquest's five percent cumulative convertible preferred stock at $100 per share.
The funds will help bolster the company's finances. SyQuest reported a net loss of $6.8 million in the quarter ending March 31, marking its seventh consecutive quarter of losses.
The company's revenues of $48.3 million in the most recent quarter was down from $78.7 million a year ago. SyQuest's quarterly revenues have declined year-over-year for more than a year.
At least one analyst says this recent investment may be too little, too late.
Howard Rosencrans, an analyst with HD Brous & Company, was unimpressed by news of the funding. In a report released today, Rosencrans pointed out that although banks and creditors are still supportive, its investors are less patient.
Rosencrans speculated that the company did not have the option of raising funds through a secondary offering because it's trading at a low level and its shares were previously diluted when the company converted $14 million in debt to equity.
The shares just six months ago were trading around 6, but closed yesterday at 2-3/8.
"Five million is a pittance," Rosencrans commented, compared to the losses that SyQuest has suffered this quarter, and is expected to incur next quarter. Rosencrans added that SyQuest, "will burn this money in an hour," on operating expenses alone.
That is not quite the case, SyQuest responds, although a company spokeswoman could not specify what funds raised through equity offerings and private investment would be used for.
Rosencrans remained unswayed, "In my 14 years following this industry I have never seen a company incur a loss on a larger basis," than Syquest.
He noted that the company has only one viable product, the SyJet, which is portable storage drive.