Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in advanced fiber optic-based technology, today announced a $50 million investment by White Hat Capital Partners (“White Hat”), an investment firm focused on sustainable value creation in technology companies serving mission-critical applications.
Proceeds from this strategic investment were partially used to fund the acquisition of Silixa, also announced today, and related transaction costs in the aggregate amount of approximately $25 million. The remaining proceeds were used to repay the Company’s outstanding $17 million term loan with PNC Bank and strengthen the Company’s balance sheet.
Luna expects to apply the proceeds of this investment across a range of initiatives already in process to accelerate growth and increase profitability, including:
- Capitalizing on Inflection Point for Adoption of Fiber Optic Sensing Solutions: Aging infrastructure and rising security concerns for pipelines and critical infrastructure has led to increased market adoption of fiber optic sensing technologies for structural health monitoring. Luna is well-positioned to implement its solutions and drive recurring revenue through continuous monitoring of these key assets, such as bridges, tunnels, and pipelines.
- Increasing Manufacturing Capacity to Meet Demand Arising from Strategic Partnerships: Luna has cultivated strategic relationships with several large global customers who are now expanding their use of Luna’s solutions, increasing demand for Luna’s products.
- Enhancing Investments in Innovation: Luna intends to leverage its increased financial flexibility to execute against its robust product roadmap and continue to be a leading developer of innovative technologies with new applications, building upon its already large library of intellectual property.
In conjunction with the strategic investment, David Chanley joined Luna’s Board of Directors. Mr. Chanley is a Co-Founder and Managing Partner of White Hat and has more than 20 years of experience in the technology sector. With this addition, Luna’s Board expanded to eight members.
“We are thrilled to welcome White Hat as a new partner,” said Scott Graeff, President and Chief Executive Officer of Luna. “David and his team bring years of experience advising and supporting technology companies, particularly in the optics and test & measurement industries. When I first met them, I was struck by how well they understood both our industry and our technologies. Their investment is not only a vote of confidence in the acquisition of Silixa, but also a strong endorsement of our strategic vision and market opportunities.”
“White Hat is excited to partner with the Luna management team to support the Company in its next stage of growth,” said David Chanley, Managing Partner at White Hat Capital Partners. “Our thorough evaluation highlighted the quality and depth of Luna’s management team and the promising addition of the talented team from Silixa. With additional scale and financial flexibility, Luna is uniquely positioned as the largest pure-play company to address the rising demand for fiber optic sensing solutions in its key end markets. These include pivotal roles in energy transition initiatives like carbon capture and storage (CCS) and electric vehicle (EV) adoption, as well as critical structural health monitoring and specialized aerospace & defense applications. We are eager to partner with Luna as the company accelerates its mission of enabling the future with fiber.”
Summary of Investment Terms
White Hat has initially purchased 52,500 shares of Series B convertible preferred stock at a purchase price of $50.0 million. Each share has an initial liquidation preference of $1,000 per share and subject to certain conditions and limitations will be convertible into shares of Luna common stock, beginning one year from issuance, at a conversion price of $6.70 per share, representing a 10% premium to the Company’s 30-day volume-weighted average price. The preferred stock will accrue quarterly dividends payable, at the Company’s option, at either an 8.5% annual rate if paid in cash or a 10% annual rate if paid in kind. Until December 21, 2026, White Hat will have the right to purchase up to an additional $12.5 million of Series B convertible preferred stock at par and otherwise on the same terms. Further details concerning the transaction and the terms of the Series B convertible preferred stock will be included in a Current Report on Form 8-K to be filed by the Company with the Securities and Exchange Commission.
