Nektar Therapeutics (NASDAQ: NKTR) saw its stock price erode on Thursday, following the company’s closing of a secondary stock issue. Investors gave the company a thumbs-down on the news by selling out of its shares, leaving it with a 3% loss at the close of trading. Meanwhile, the benchmark S&P 500 index ticked up on the day, rising by 0.8%.
Just after market hours on Wednesday, Nektar announced that it completed that new share flotation. The clinical-stage biotech sold slightly more than 4.89 million shares of its common stock. Within that number were 638,298 that were sold to the underwriters of the issue. Collectively, those entities fully exercised their option to buy Nektar stock.
The gross proceeds of the issue, which was priced at $23.50 per share, amounted to roughly $115 million. Nektar wrote that it aims to deploy the new funds for “general corporate purposes,” which might include drug development and manufacturing, and research and development activities.
As often happens with secondary share flotations, particularly in the frequently cash-hungry biotech space, this one is notably dilutive to existing shareholders. Prior to this issue, Nektar had slightly more than 12.4 million common shares outstanding. So that nearly 5 million share-count addition is going to make a difference — and not in a positive way.
At least the money is being raised by a business with potential. Relatively speaking, Nektar has quite a few pipeline projects in development. Its leading one, rezpegaldesleukin, recently tested quite well for treating moderate-to-severe atopic dermatitis, a skin disorder.
That said, the new shares are weighing on the company, and investors are probably worried that more equity offerings are coming, hence more dilution. While a company’s share count shouldn’t be the only consideration when evaluating a stock, it does matter, and this latest one from Nektar has sparked concern.
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