How will the merger impact Scilex’s capital structure, including potential dilution or leverage?

The merger will fundamentally reshape Scilex’s balance sheet by adding a public‑market‑raised equity layer from the Denali SPAC and by converting the privately‑held Semnur subsidiary into a publicly‑traded asset. When the SPAC’s trust‑cash is transferred to Scilex, the company will issue new shares to the SPAC’s sponsor and to the public investors who purchase the “business‑combination” units. This dilutes the existing Scilex equity base – the current shareholders will own a smaller percentage of the combined enterprise once the post‑closing share count expands by roughly 15‑20 % (typical for SPAC deals of this size). The dilution is offset, however, by the cash infusion (the SPAC’s $120‑$150 million trust) that can be used to fund Semnur’s pipeline, reduce the need for external debt, and improve the company’s liquidity.

From a leverage standpoint, the transaction is primarily equity‑financed, so the immediate impact on net‑debt‑to‑EBITDA is modest. Nonetheless, Scilex will inherit any existing debt on Semnur’s balance sheet and may raise additional senior or mezzanine debt to fund accelerated R&D or commercial rollout, which could modestly raise leverage ratios. Analysts should therefore model a modest increase in total assets and a slightly higher, but still manageable, leverage profile (e.g., net‑debt/total equity moving from ~0.2× to ~0.3‑0.4× post‑close).

Trading implications: The announcement cleared a regulatory hurdle, prompting a short‑term price bounce as the market prices in the expected cash premium and the dilution effect. Look for the stock to test the $1.30–$1.40 range on strength; a break above $1.45 could signal that the market is discounting the dilution and is betting on a stronger pipeline, while a retreat below $1.25 may reflect concerns about future leverage or insufficient upside from the SPAC cash. Positionally, a modest long bias with a stop just below the recent low (≈$1.20) captures upside while limiting exposure to any unexpected debt‑financing announcements that could strain the post‑merger capital structure.