NEW YORK, July 25, 2026 – Shares of Nuburu (OTCMKTS:BURU) experienced a sharp decline of 39% on Friday, closing at 4.44 cents per share. The sell-off was triggered by investor anxiety over the potential dilution stemming from the company's recently issued floating-rate preferred shares.
The Series B preferred stock, with an aggregate stated value of $73.4 million, is 4.5 times larger than Nuburu's common equity market capitalization of approximately $16.3 million. This disparity has raised red flags among market participants, as the conversion rate of the preferred shares is tied to Nuburu's common stock price. A lower stock price would result in the issuance of more common shares upon conversion, further diluting existing shareholders.
Each preferred share has a stated value of $100, and conversion is based on the lower of two closing bid prices. Holders can begin converting after a 45-day period, subject to a 9.99% ownership cap. Nuburu issued 733,853 Series B shares as part of a $38 million capital raise, with the total stated value equating to 1.93 times the gross proceeds. It is important to note that this stated value is used for conversion calculations and does not represent actual cash held by the company, as the instruments lack liquidation rights.
The potential impact of conversion is significant. Under an assumed conversion price of 4.44 cents, the illustrative common shares would be approximately 1.653 billion, which is 4.51 times the current 366.4 million shares outstanding. Even the most conservative scenario would exceed Nuburu's authorized share count of 900 million. The purchase agreement anticipates an increase in authorized shares, pending stockholder approval. Initially, only 205.6 million conversion shares were registered, with the company committing to register additional shares later.
Filings released Thursday revealed that Esousa Group Holdings holds a substantial position, including 45.34 million common shares (a 9.9% interest), 127.01 million pre-funded shares, and conversion rights associated with 517,559 preferred shares. It appears Esousa was allocated all pre-funded warrants and approximately 70.5% of the preferred shares. The ownership limit currently halts further warrant exercises and preferred conversions, but does not eliminate the overall potential supply.
Nuburu has a contractual right to defend against conversion at reduced prices, but only under specific conditions, including full registration, sufficient authorized shares, and the stock trading above approximately 31.1 cents for ten consecutive sessions. Friday's closing price of 4.44 cents did not meet that threshold.
The offering also addressed immediate debt concerns. Nuburu repaid $15.5 million in debenture principal and $1.25 million of Lyocon notes, totaling 47% of the projected net proceeds. Executive Chairman Alessandro Zamboni noted that these payments "decisively simplified our capital structure." After these repayments, approximately $18.85 million remains for acquisitions, working capital, and other uses. This amount is not an up-to-date cash-on-hand figure.
The funding far exceeds Nuburu's operational capacity. The company reported unaudited first-quarter revenue of $407,644 and a net loss of $459,898. The total funds raised are roughly 93 times the quarterly sales. Risks remain, including potential instability in OTC trading, the need for further fundraising, and regulatory hurdles such as Italy's Golden Power regulations for the Tekne deal and the pending NYSE review.
U.S. markets resume trading Monday, July 27. Investors are awaiting Nuburu's anticipated NYSE review filing and details on the planned reverse split. Any developments regarding Tekne approval would be significant. The preferred share conversion window remains closed for the upcoming week. While debt relief has improved short-term liquidity, market attention continues to focus on the floating conversion formula and the potential shares it could generate.
