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Ondas (ONDS) intends to raise $30 million from the sale of its common stock in an uplisting/Nasdaq public offering, according to an amended registration statement.

Sunnyvale, California-based Ondas Networks was founded in 2006 to provide wireless data radio technologies for IoT applications in the electric utilities, oil & gas, water, rail, transportation as well as government industries.

Management is headed by Chairman and CEO Eric A. Brock, who has been with the firm since 2017 and was previously Portfolio Manager at Clough Capital Partners.

Ondas’ lead product is FullMAX, a software defined radio [SDR] system consisting of a wireless base station, fixed and mobile remote radios as well as supporting technology for wide-area broadband networks that enable secure industrial-grade connectivity.

The company’s SDR equipment is fully IEEE 802.16s compliant, has the ability to use frequencies between 30 MHz and 6 GHz, and has a wide coverage of up to 30 miles away from the tower.

Management calculates the total area coverage per FullMAX tower to be up to 2,800 square miles and compares it to the average of 4G tower, which they claim to be around 28 square miles.

“For example, to cover a territory of over 10,000 square miles may require only four FullMAX towers compared with more than 350 typical 4G towers, depending on the topography of the region.”

Besides their FullMAX technology, Ondas provides network design, RF planning, product training and spectrum consulting, technical support and related software.

Below is an overview image of the company’s target industries and applications:

Source: Ondas S-1 Filing

Source: Ondas S-1 Filing

Ondas markets its products to critical infrastructure providers through a direct sales force, third-party resellers, customer referrals, consultant referrals, trade show attendance, general marketing efforts as well as public relations.

Sales and marketing expenses as a percentage of revenue have decreased dramatically as revenues have risen in 2020.

The sales efficiency rate, defined as how many dollars of additional gross profit are generated by each dollar of sales & marketing spend, rose sharply to 1.8x in the most recent six month reporting period.

According to a recent market research report by MarketsAndMarkets, the global software defined radio wireless broadband industry is expected to reach $30 billion by 2022.

This represents an 8.63% CAGR between 2017 and 2022.

The land-based commercial segment is expected to lead demand growth due to increased investment by private operators in improved technologies.

Major competitors that provide or are developing software-defined wireless technologies include:

  • Harris
  • Northrop Grumman (NOC)
  • BAE Systems (BAESF)
  • Rockwell Collins (RC)
  • Thales (THLEY)
  • General Dynamics (GD)
  • Huawei
  • ZTE Corp (ZTCOY)
  • Elbit Systems (ESLT)

The company’s technology is, according to their website, cheaper to install than LTE 4G or 5G networks due to the lower costs of the radio frequency spectrum and provides larger coverage of up to 30 miles from a tower.

ONDS’s recent financial results can be summarized as follows:

  • Growing topline revenue from a tiny base
  • Increasing gross profit but decreasing gross margin
  • Fluctuating operating losses
  • Variable and negative cash flow from operations in 2020

Below are relevant financial metrics derived from the firm’s registration statement:

Source: Ondas S-1 Filing

Source: Ondas S-1 Filing

As of Sept. 30, 2020, the firm has $2.1 million in cash and equivalents and $18.6 million in total liabilities.

Free cash flow from the twelve months ended Sept. 30, 2020 was negative ($8.2 million).

ONDS intends to sell 2.88 million shares of common stock at an expected $10.40 per share for gross proceeds of approximately $30 million, not including the sale of customary underwriter options.

No existing shareholders have indicated an interest to purchase shares at the IPO price.

Assuming a successful IPO at the expected price, the company’s enterprise value at IPO would approximate $256.7 million.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 12.18%.

Per the firm’s most recent regulatory filing, the firm plans to use the net proceeds as follows:

We currently expect that we will use the net proceeds from this offering, together with our existing cash and cash equivalents, as follows: (1) to continue research and development of future configurations of our FullMAX platform; (2) to build product inventory and support expected increased levels of customer sales activity; (3) subject to us receiving gross proceeds of not less than $20 million in the offering, to repay approximately $5 million of principal and accrued interests under the Steward Capital Loan and Security Agreement, that matures on September 9, 2021, and (4) for other general corporate purposes.

Management’s presentation of the company roadshow is not available.

Listed underwriters of the IPO are Oppenheimer & Co., National Securities, Northland Capital Markets and Spartan Capital Securities.


ONDS seeks to uplist to the Nasdaq to attract additional capital for its product and growth expansion plans.

The company’s financials show strong revenue growth, but from a tiny base. Gross profit is up also, but gross margin is down and the firm continues to produce significant operating losses for a company of its size.

Cash flow from operations has swung to the negative so far in 2020.

Sales and Marketing expenses as a percentage of total revenue have dropped and the firm’s Sales and Marketing efficiency rate has grown markedly as revenues have grown.

The global market opportunity for software-defined radio networks is large and expected to grow at a moderate rate in the coming years.

Oppenheimer & Co. is the lead left underwriter and there is no data on IPOs led by the firm over the last 12-month period.

As to valuation, management is asking investors to pay an Enterprise Value / Revenue multiple of nearly 130x.

While the firm has grown revenue from a small base, that kind of valuation multiple is excessive.

My opinion is to AVOID the offering based on excessive valuation.


Expected IPO Pricing Date: December, 2020.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice. Past performance is no guarantee of future results.)

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