RA Medical Systems (NYSEMKT:RMED) is rising steadily today on the news of a merger. In a statement released today, the company announced that it has entered into a “definitive merger agreement” with medical technology producer Catheter Precision. This news sent RMED stock shooting up in-premarket trading and it hasn’t stopped since. Pending no further complications, the two companies will complete a stock-for-stock reverse merger transaction. This will result in Catheter becoming a subsidiary of RA. Seeking Alpha reports, “The Catheter Precision stakeholders are expected to take ~80% ownership of the combined company, while the rest will be RMED investors on a fully diluted basis.”
The momentum generated by this news has been great for RMED stock so far. Shares jumped 32% in pre-market trading and kept rising after Wall Street’s opening bell. As of this writing, RMED is up more than 28% for the day, despite losing some momentum in the past hour. While the early-morning momentum has faded, this merger has the potential to boost RMED stock permanently if the deal is successfully executed. Let’s take a closer look at both companies and how the acquisition could help RMED investors.
What It Means for RMED Stock
As a microcap penny stock, RMED is the type of company that will make some investors wary. It doesn’t help that the company is coming off of an extremely difficult quarter. RMED stock has shed almost 60% of its value over the past six months. However, the news hasn’t been all bad. In July 202, it saw some growth after receiving a positive update from the Food and Drug Administration (FDA). As InvestorPlace contributor William White reported:
The big news here is the FDA giving clearance to the company’s DABRA 2.0 catheter as part of the DABRA Excimer Laser System. This new catheter has a braided overjacket designed to improve “deliverability and kink resistance when navigating tortuous anatomy.
Now this merger offers RMED the possibility of extending into new medical technology markets. Catheter intends to pursue three primary product areas. At the forefront is View Into Ventricular Onset (VIVO), “an FDA-cleared and CE Mark product that utilizes non-invasive inputs to locate the origin of ventricular arrhythmias.” The statement on the merger also notes that:
While much past growth in the electrophysiology market has been for atrial fibrillation, Catheter Precision believes that ventricular arrhythmias represent a large growth area moving forward.
Other areas include further generations of Amigo, the company’s robotic arm that functions as a catheter control device. Catheter has also indicated that is exploring a device to “assist in the closure of the insertion site of the percutaneous catheter or other device used within the body.” According to the company, “it is estimated that the worldwide market for this closure assist device is over one million procedures per year.”
What Comes Next
The acquisition of Catheter makes one thing clear: RA Medical is focused on growth and it sees profitability in new areas.
Catheter is an established company with technology that can help RA gain the access it needs to secure a share of these fast-growing markets. And while its microcap status will make some investors nervous, its low price of 18 cents per share will hard for others to resist. If trading volume increases, RMED stock will start rising again. Catheter’s product pipeline is likely to see some positive updates as well, which will also serve as growth catalysts for its new parent company.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.