HUB Cyber Security Updates on Strategic Share Registrations and Loan Securities
Rhea-AI Summary
HUB Cyber Security (NASDAQ: HUBC) has filed an update to its registration statement with the SEC on December 31, 2024. The filing includes shares related to potential future issuances from convertible notes conversion and warrant exercises. A significant portion of currently outstanding shares serve as loan securities held by key investors, which will be cancelled upon loan repayment.
The company indicates this is a preliminary step before an expected significant financing round, which they anticipate will enable loan repayment before the loan securities convert to shares. CEO Noah Hershcoviz states these updates are part of their strategy to strengthen HUB's financial position and support future growth while maintaining investor transparency.
Positive
- Company anticipates securing a significant financing round
- Strategic plan in place to address and repay outstanding loans
Negative
- Potential significant share dilution from convertible notes and warrants
- Large portion of outstanding shares tied up as loan collateral
- Current reliance on debt financing
Insights
This update reveals concerning financial maneuvers that warrant careful scrutiny. The company's complex share structure, involving convertible notes, warrants and shares held as loan collateral, suggests significant dilution risk for current shareholders. The mention of shares being held as "security for loans" indicates substantial debt obligations, while the planned "significant financing round" implies further capital needs.
A critical detail is that these securities-backed loans must be repaid before share cancellation - failure to do so could trigger forced conversions and dramatic share dilution. The timing of this announcement, coming at year-end, appears strategic but raises questions about the company's current cash position and debt load.
In simpler terms: Imagine taking out a loan and putting your house as collateral. HUBC has essentially put up shares as collateral for loans. If they can't repay these loans, the lenders could end up owning a much bigger piece of the company, making existing shareholders' pieces worth less.
The registration statement update signals complex securities arrangements that require careful legal analysis. The structure involving convertible notes and shares as loan security creates multiple contingent obligations. While the company frames this as preparatory for future financing, it effectively creates a multi-layered capital structure with significant potential impact on ownership rights.
The statement that shares "will be cancelled once the loans are repaid" requires careful scrutiny of the underlying agreements, as such arrangements often include specific conditions and triggers. The planned financing round's success is important - failure could activate conversion rights and alter control dynamics.
For non-experts: This is like having multiple promises to sell parts of your business to different people under various conditions. It's legal but creates uncertainty about who will ultimately own what portion of the company.
TEL AVIV, Israel, Jan. 02, 2025 (GLOBE NEWSWIRE) -- via IBN – HUB Cyber Security Ltd. (NASDAQ: HUBC) (“HUB” or the “Company”), a leader in cybersecurity and advanced data fabric solutions, provides an update on recent filings and share registrations.
On December 31, 2024, the Company filed an update to its registration statement with the U.S. Securities and Exchange Commission. Many of the shares listed in this filing relate to future potential issuances from the conversion of outstanding convertible notes and the exercise of warrants held by various investors, which does not always occur.
Additionally, a significant portion of the shares currently outstanding are held as security for loans, primarily by key investors. These shares were issued for security purposes only and will be cancelled once the loans are repaid. This is a preliminary step the Company is taking in advance of a significant financing round which the Company expects will allow for the repayment of such loans prior to the loan securities being converted to shares.
Noah Hershcoviz, CEO of HUB, commented: "These updates are a key part of our strategy to strengthen HUB's financial position and support future growth. By addressing important financial elements, we’re positioning the Company to capitalize on future opportunities while ensuring transparency with our investors."
About HUB Security Ltd.
HUB Cyber Security Ltd (“HUB”) was established in 2017 by veterans of the elite intelligence units of the Israeli Defense Forces. The Company specializes in advanced cybersecurity solutions that protect sensitive commercial and government information. HUB’s offerings include encrypted computing technologies that prevent hardware-level intrusions and innovative data theft prevention solutions. Operating in over 30 countries, HUB serves a diverse client base with its cutting-edge cybersecurity appliances and services.
Forward-Looking Statements
This press release contains forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995, including statements about HUB’s financial condition, results of operations, earnings outlook and prospects of its debt refinancing. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “future,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “seem,” “should,” “will,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements are based on the current expectations of the management of HUB Security, as applicable, and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties, or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those discussed and identified in public filings made with the SEC by the HUB Security and the following: (i) significant uncertainty regarding the adequacy of HUB Security’s liquidity and capital resources and its ability to repay its obligations as they become due; (ii) the war between Israel and Hamas commenced in October 2023, and the expansion of hostilities to other fronts, which may harm Israel’s economy and HUB Security’s business; (iii) expectations regarding HUB Security's strategies and future financial performance, including its future business plans or objectives, prospective performance and opportunities and competitors, revenues, products and services, pricing, operating expenses, market trends, liquidity, cash flows and uses of cash, capital expenditures, and HUB Security's ability to invest in growth initiatives and pursue acquisition opportunities; (iv) the outcome of any legal or regulatory proceedings against HUB Security in connection with our previously announced internal investigation or otherwise; (v) the ability to cure and meet stock exchange continued listing standards and remain listed on the Nasdaq; (vi) competition, the ability of HUB Security to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; (vii) limited liquidity and trading of HUB Security’s securities; (viii) geopolitical risk, including military action and related sanctions, and changes in applicable laws or regulations; (ix) the possibility that HUB Security may be adversely affected by other economic, business, and/or competitive factors; (i) other risks and uncertainties set forth in the sections entitled "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" in HUB Security’s Annual Report on Form 20-F/A filed on October 22, 2024.
Should one or more of these risks or uncertainties materialize, or should any of the assumptions made by the management of HUB Security prove incorrect, actual results may vary in material respects from those expressed or implied in these forward-looking statements.
All subsequent written and oral forward-looking statements concerning the business combination or other matters addressed in this press release and attributable to HUB Security or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in the press release. Except to the extent required by applicable law or regulation, HUB Security undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release to reflect the occurrence of unanticipated events.
Investor Relations:
Lytham Partners
Ben Shamsian
646-829-9701
shamsian@lythampartners.com
FAQ
What did HUBC's December 31, 2024 SEC registration statement update include?
How will HUBC handle the shares currently held as loan securities?
What is HUBC's strategy regarding the convertible notes and warrants?
How might HUBC's registration statement update affect shareholders?
