Image source: Getty Images.
Continue Reading Below
Investors in Idera Pharmaceuticals (NASDAQ: IDRA) are having another rough day. Shares are down by more than 10% as of 11:45 a.m. EDT on Friday after the company announced the pricing of its secondary share offering.
The clinical stage biopharma said that it is selling 25 million shares of common stock for$2.00each. In addition, the company also granted the underwriters of the deal the option to purchase an additional 3.75 million shares if they choose. In total, this transaction could dilute current shareholders by nearly 24%.
Since shares were trading for over $3 as little as two weeks ago there is no doubt that some investors are upset with this pricing news. In fact, shares closed on Thursday at $2.18, which suggests that Idera had to discount its pricing in order to attract enough buyers.
Given the news, it's no wonder why the stock is tanking again.
As of the end of the second quarter, Idera's cash balance stood at $64 million. However, its quarterly burn rate is roughly $13 million, which hints that its current cash balance is somewhere in the neighborhood of $51 million. That suggests that after this common stock offering that Idera will have just over $100 million in cash on its balance sheet, which at current spending levels should be enough to sustain the company for about two years.
However, the company's spending on research and development could rise substantially over the next few years if it continues to advance its two product candidates down the regulatory approval pathway. Thus, Idera could once again be tapping shareholders for fresh capital in the not-too-distant future.For that reason, I plan on keeping far away from this stock.
A secret billion-dollar stock opportunity The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.
Brian Feroldi has no position in any stocks mentioned.Like this article? Follow him onTwitter where he goes by the handle@Longtermmindsetor connect with him on LinkedIn to see more articles like this.
The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.