SmartKem Inc.'s stock rose sharply after the company announced it had entered into an agreement to convert approximately $2.0 million of outstanding accounts payable into equity securities. The share price reaction amounted to an 11.5% increase following the disclosure.
Under the conversion arrangement, the company satisfied the outstanding obligations by issuing a combination of common stock and pre-funded warrants. The implied conversion price for the securities was $2.75 per share. Once those securities were issued, SmartKem reported that the prior accounts payable were fully discharged.
Management characterized the transaction as a non-cash method for reducing liabilities. By replacing the payables with equity-linked instruments, SmartKem said it has materially lowered its accounts payable balance without making cash payments, a step the company said strengthens its balance sheet and should reduce ongoing cash requirements.
The securities issued in the transaction were sold in a private placement exempt from registration under the Securities Act of 1933 pursuant to Section 4(a)(2). The company noted that these securities are not registered and therefore may not be offered or sold in the United States without registration or an available exemption from registration.
SmartKem describes its business as the development of a new class of transistors built on proprietary advanced semiconductor materials, with the aim of innovating within the electronics industry. The company presented the conversion as a balance-sheet management action rather than a cash-raising measure.
Investors reacted to the clarity on liability elimination and the expected reduction in near-term cash needs, with the market responding by bidding up the stock. The filing language emphasized both the completion of the obligation discharge and the private placement character of the issuance, including the restriction on resale absent registration or an exemption.
This report is limited to the details provided by the company about the conversion transaction and its immediate accounting and securities-law implications. It reflects the company statements that the obligations were fully discharged, the issuance terms at an implied $2.75 conversion price, and the private, unregistered nature of the transaction under Section 4(a)(2).