Shares of Bellicum Pharmaceuticals (NASDAQ: BLCM) fell nearly 14% today after it filed two S-3 documents with the U.S. Securities and Exchange Commission yesterday afternoon. An S-3 is a registration form used to disclose certain activities that involve shares of a company's common stock.
The first S-3 reported that certain shareholders of Bellicum Pharmaceuticals stock were looking to sell a large holding of about 5 million shares. This is not all that uncommon of a filing, especially when large blocks of stock that comprise a significant percentage of a company's outstanding shares (15% in this case) are about to change hands. For this transaction, the company is not issuing any new shares, nor will it receive any proceeds. It's just a matter of regulatory paperwork.
The second S-3 was different. It notified the SEC and shareholders that Bellicum Pharmaceuticals would be able to sell up to $150 million in newly issued common stock as needed over a specified amount of time. This new "shelf registration," as it's called, replaced the previous registration that spanned the prior 18 months. It also includes about $81 million in unsold shares from that previous agreement.
As of 3:08pm EDT, the stock had settled to a 10.9% loss.
Investors never like to hear that a company could take actions that result in possible dilution. That's especially true for a company of Bellicum Pharmaceuticals' size and operational fitness: It has a relatively small $400 million market cap and doesn't generate any revenue. If all shares under the new shelf registration are sold, it would result in significant dilution -- at least 33%.
While historically the company has been kind to shareholders in this regard, it did issue new shares during the first quarter of 2017 that resulted in dilution of 22%. Without any commercial products to speak of, investors may need to get used to dilutive funding for the foreseeable future.
These types of transactions and filings aren't uncommon for preclinical pharma companies. The ability to fund operations with share offerings is actually one of the main reasons to become a publicly traded company in the first place. The silver lining, if there is one, is that Bellicum Pharmaceuticals does appear to be making headway within its pipeline. But today's move serves as a reminder that obtaining the necessary capital to fund development won't always be done in a shareholder-friendly manner.
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