AI-ECG diagnostic firm HeartSciences retreats on capital raise announcement

Quotes on HeartSciences, a small-cap maker of AI-powered technology for early detection of heart disease, plunged 5% yesterday, March 3, after the company announced its intention to offer investors up to $15 million worth of units consisting of one preferred share and one warrant each. For context, its current market capitalization stands at $3.5 million.

Yesterday, HeartSciences stock slipped 5% on the Nasdaq to $3.38 per share, before clawing back most of the losses in after-hours trading, when it gained 4.7% to $3.54 per share. It is down almost 12% for the year to date and off 72% over the last 12 months.

Earlier in the day yesterday, the company disclosed its plan to offer investors almost 4.3 million units of one preferred share and one warrant at $3.50 apiece, with a minimum initial investment amount per investor of $675 and additional purchases in increments of at least $675.

Investors will have the option to convert preferred shares into common stock at any time. Meanwhile, the warrants will expire in three years and have an exercise price of $5 per share.

HeartSciences expects to raise up to $15.0 million from the offering and up to $37.7 million if all warrants and placement agent options are exercised. As of the close of trading yesterday, the company’s total market capitalization stood at $3.5 million.

HeartSciences is developing AI-ECG diagnostic solutions for healthcare facilities worldwide for use either via a cloud-based platform with existing ECG machines or through HeartSciences’ proprietary device.

However, HeartSciences’ device has yet to receive FDA approval and is not available in the U.S. The company plans to submit research data to the FDA by the end of the first quarter of 2025.

If it gets the green light, HeartSciences will be able to compete for a share of the ECG market, which, as previously estimated by CEO Andrew Simpson, is set to reach $25 billion a year. Currently, the company is not making money: In the fiscal-2025 second quarter (ended October 31), it reported no revenue and $4.1 million in cash and equivalents.

According to MarketWatch, the two analysts who cover HeartSciences both rate it a “buy.” Their average target price is $13.50 per share, almost four times the closing price yesterday.