Analysis of NovaBay Pharmaceuticals' $134 Million Private Placement of Pre-Funded Warrants

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NovaBay Pharmaceuticals, Inc. (NYSE: NBY) announced the completion of a large-scale private placement transaction on January 16, 2026. The company entered into a securities purchase agreement with four institutional investors, issuing pre-funded warrants in exchange for gross proceeds of approximately $134 million[1].

Item	Details
Issuance Size	837,696,130 pre-funded warrants
Issuance Price	$0.17 per share
Exercise Price	$0.01 per share
Total Proceeds Raised	$134,000,000
Exercise Method	Phased exercise in three tranches
Current Share Price	$14.77 (closing price on January 16, 2026)

This private placement involved four institutional investors[1][2]:

1. R01 Fund LP
   - Institutional investment fund
2. Framework Ventures IV L.P.
   - Venture capital firm
3. Tether Investments, S.A. de C.V.
   - Institutional investor
4. Sky Frontier Foundation
   - Family office/foundation

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This private placement will have a

on the company’s equity structure. Based on the current market capitalization of $1.86 billion and share price of $14.77, the company currently has approximately 126 million outstanding shares[0]. If all 838 million newly issued warrants are exercised, it will result in:

Metric	Value
Current Outstanding Shares	125,930,941 shares
Maximum Newly Issued Shares	837,696,130 shares
Potential Dilution Ratio	665.2%
Total Shares After Dilution	963,627,071 shares

: The shareholding ratio of existing shareholders will plummet from 100% to approximately 13.1%, meaning each held share will be diluted to about 0.13 of effective equity. This level of dilution iswithin the biopharmaceutical industry.

The warrants adopt a phased exercise mechanism, with each tranche requiring shareholder approval[1]:

Tranche	Percentage	Exercise Date	Number of Shares Involved
Tranche 1	20%	July 16, 2026	167,539,226 shares
Tranche 2	30%	October 16, 2026	251,308,839 shares
Tranche 3	50%	January 16, 2027	418,848,065 shares

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NovaBay underwent a major strategic transformation in 2025. According to SEC filings, the company held a special shareholder meeting on April 16, 2025, authorizing the board of directors to decide on the liquidation and dissolution of the company[3]. However, a series of subsequent transactions completely changed the company’s fate:

1. August 2025
   : David E. Lazar invested $6 million to purchase the company’s non-voting convertible preferred stock and assumed the position of new Chief Executive Officer[3]
2. September 2025
   : The company sold its core eye care business to PRN[4]
3. January 2026
   : Completed the $134 million private placement, and the company’s strategy shifted to the digital asset sector

According to the 8-K filing submitted on January 16, 2026, the company has completed a

, retaining its original wound care business while adopting a capital allocation strategy focused on acquiring digital assets[5].

:

• Core Holding
  : SKY Token (native token of Sky Protocol)
• Initial Holding
  : Approximately 944 million SKY Tokens
• Investment Strategy
  : Long-term holding to participate in protocol-level economic activities and potential capital appreciation
• Future Plan
  : Evaluate other digital assets that meet similar economic and risk criteria

[5]:

• Cash: $25,000,000
• SKY Tokens and Stablecoins: $109,031,380.86

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:

• Received a $134 million capital injection, significantly enhancing financial strength
• Eliminated the company’s liquidation risk, maintaining its listed status
• Professional supervision and strategic resources brought by new investors

:

• The extreme 665% dilution ratio causes significant equity dilution for existing shareholders
• The share price has risen by over 3000% from its 2024 low, posing a risk of technical correction[0]
• Transaction terms show a huge 147,600% premium between the exercise price of $0.01 and the current price of $14.77, creating conditions for low-price exercise in the future

Category	Positive Impact	Negative Impact
Equity Structure	Access to strategic investor resources	Transfer of control to new investors
Governance Structure	Professional board supervision	Investors hold veto rights
Financial Flexibility	Reduced debt pressure	Volatility in digital asset values
Strategy Execution	Sufficient funds to support mergers and acquisitions	New business model is unproven

:

• Exponential growth potential of the digital asset market
• Significantly enhanced strategic M&A capabilities
• Establishing a first-mover advantage in the emerging Web3 sector

:

• Uncertainty in the regulatory environment for digital assets
• SKY Token price fluctuation risk
• Doubts about the profitability and sustainability of the new business model

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Pursuant to the investor rights agreement, the four institutional investors received the following important rights[1][2]:

1. Registration Rights
   : Right to require the company to file an S-3 registration statement for future resale
2. Board Nomination Rights
   : Right to nominate director candidates for corporate governance
3. Supermajority Veto Rights
   : Veto right over specific corporate transactions
4. Digital Asset Strategy Approval Rights
   : Changes to investment strategy require investor approval

As part of his previous $6 million investment, David E. Lazar has obtained the following rights[3]:

• Right to remain a board member or nominate another candidate for the 2025 annual shareholder meeting
• Right to nominate up to three additional directors upon receiving shareholder approval and completing the second closing
• Rights are subject to his shareholding ratio and other conditions

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Risk Category	Risk Description	Risk Level
Dilution Risk	665% equity dilution will severely weaken existing shareholders’ equity	High
Control Change Risk	New investors may gain actual control of the company	High
Business Transformation Risk	Lack of experience in transitioning from biopharmaceuticals to digital assets	High
Execution Risk	Doubts about whether the new strategy can generate sustainable revenue	Medium-High
Market Risk	Severe price volatility of digital assets	High
Regulatory Risk	Uncertain regulatory policies for the digital asset industry	Medium-High
Liquidity Risk	Unlocking of a large number of shares may lead to selling pressure	Medium-High

Positive Factor	Potential Benefit
Financial Strength	$134 million provides sufficient funds for strategy execution
Elimination of Liquidation Risk	The company can continue operations instead of being dissolved
Professional Investors	Bring industry experience and resource networks
Market Attention	The transaction has attracted widespread market attention, increasing liquidity

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This $134 million private placement of pre-funded warrants is a

for NovaBay Pharmaceuticals:

:

• The company obtained valuable capital to continue its survival and development
• The strategic transformation opened up new growth paths for the company that was previously facing dissolution
• The professional backgrounds of new investors may bring strategic value to the company

:

• The 665% equity dilution ratio causes
  catastrophic equity damage
  to existing shareholders
• The huge gap between the exercise price of $0.01 and the current price of $14.77 means new investors will acquire shares at an extremely low cost
• The company lacks industry experience and performance validation in transitioning from biopharmaceuticals to digital assets
• The governance rights obtained by investors may further weaken the control of existing shareholders

1. Closely monitor
   the shareholder voting results and approval status for each tranche of warrant exercises
2. Evaluate
   the feasibility and risk exposure of the digital asset strategy
3. Monitor
   governance changes after new investors exercise their board nomination rights
4. Pay attention
   to the company’s future strategic M&A announcements and business integration progress
5. Consider
   participating in the upcoming shareholder meeting to exercise voting rights

From a value creation perspective, this transaction

. Although the company avoided liquidation and obtained development funds, the extreme dilution ratio and unfavorable exercise terms allow new investors to acquire a large number of shares at an extremely low cost. The company’s strategic transformation—from ophthalmic care biopharmaceuticals to digital asset investment—represents a, whose success is highly uncertain. Existing shareholders need to remain highly vigilant about the company’s future direction and fully exercise their shareholder rights to protect their own interests.

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[1] StockTitan.net - “NovaBay (NYSE: NBY) sells pre-funded warrants for $134M financing” (https://www.stocktitan.net/sec-filings/NBY/8-k-nova-bay-pharmaceuticals-inc-reports-material-event-97a35ad93311.html)

[2] SEC EDGAR - NovaBay Pharmaceuticals 8-K Filing (2026-01-16) (https://www.sec.gov/Archives/edgar/data/1389545/000143774926001459/nby20260116_8k.htm)

[3] NovaBay Pharmaceuticals Investor Relations - “NovaBay Pharmaceuticals Enters Into $6 Million Securities Purchase Agreement with Investor David E. Lazar” (https://investors.novabay.com/press-release?i=157421)

[4] KoalaGains - “NovaBay (NBY) Stock Skyrockets 43.98% on Acquisition Buzz” (https://koalagains.com/daily-top-movers/top-gainers/details/f9c8599d-8404-420e-aa47-7a44af73bfba)

[5] SEC EDGAR - NovaBay Pharmaceuticals 8-K Filing - Business Overview Section (https://www.sec.gov/Archives/edgar/data/1389545/000143774926001459/nby20260116_8k.htm)

[6] EBC Forex - “NBY Stock Up 100%: What Just Happened to NovaBay Stock?” (https://www.ebc.com/forex/nby-stock-up-100-what-just-happened-to-novabay-stock)