If you are an investor, particularly within the 3D printing space, then you know that it often takes nerves of steel to not panic when the stocks you own seem to be on a rollercoaster from hell. For instance most of the 3D printing stocks on the market currently are down substantially over the last 12-18 months, some by as much as 80%. This is tough to take from any perspective, whether you bought in high or low, but ultimately if you have done your due diligence and believe that the company you own shares in has a bright future, selling low is certainly not something any investors should be doing.
One of the more interesting publicly traded companies within the 3D printing space is Organovo (NYSEMKT: ONVO). The company has an eventual goal of 3D printing both partial and complete human organs, perhaps transforming the way the medical community deals with organ transplants. Because of its rather small market cap and its futuristic business model, which undoubtedly makes some investors a tad bit nervous, their stock can make some fairly dramatic moves when news hits. With a 52-week share price range of $3.25 – $9.25, you certainly need to have confidence in the management of the company to stick out their rollercoaster ride.
This has never been more accurate a statement than yesterday as shares were down over 17% at one point during the day. The reason? Dilution.
Yesterday, despite having approximately $50.1 million in cash and cash equivalents on their balance sheet as of March 31, the company decided to raise an additional $40,056,250 via an underwritten public offering at a price of just $4.25 per share. A total of 9,425,000 shares will be issued as part of this offering with an additional 1,413,750 options to purchase shares at the same price granted to the underwriters, which are good for the next 30 days.
The drop wasn’t so much caused by the share offering, as it was the offering price. Shares of Organovo’s stock closed at $5.23 on Wednesday, prior to the announcement, meaning that the new buyers will be getting a substantial discount when compared to where the stock was trading prior. It also signaled to the market that the company felt that $4.25 was a decent valuation for their stock, otherwise they would not have agreed to this deal.
In comments issued by the company in a market update back on March 13, they stated:
“We have recently communicated we expect spending on current projects to ramp our annual burn rate to $25 million per year; but even at that higher rate of spending, we have approximately two years of operating cash on hand.”
This means that Organovo now will have close to 4 years worth of cash on hand for operations, and absolutely no debt should their current burn rate continue. Without getting into specifics, the company stated that the additional cash will be used for “general corporate purposes, including research and development, the development and commercialization of its products, general administrative expenses, license or technology acquisitions, and working capital and capital expenditures.”
Shares are currently trading at $4.43 at the time we published this story. Let us know if you are a shareholder in this company, and what your thoughts are on this recent share offering. Discuss in the Organovo Raises an Additional $40M forum thread on 3DPB.com.