Why Relay Therapeutics Plummeted by Nearly 14% Today
Relay Therapeutics (NASDAQ: RLAY), one of a clutch of biotech companies that are developing treatments in the wide and potentially lucrative oncology field, didn't have a good Wednesday on the stock market. This followed the latest news about the biotech company's upcoming secondary share issue, which many investors consider to be unacceptably dilutive. On the back of that news, Relay's stock closed the day almost 14% lower, in contrast to the 1%-plus gain of the S&P 500 index that day.
A $200 million move
Relay originally announced Monday it was seeking to raise gross proceeds of $200 million in a fresh offering of its common stock. After market hours the following day it provided more detail, stating that the issue would be almost 28.6 million shares. These have been priced at $7 per share, which is down considerably from recent peaks.
The underwriters of the issue, which is being led by Goldman Sachs, TD Cowen, Stifel, and Bank of America Securities, have been granted a 30-day option to collectively purchase nearly 4.3 million additional shares.
All told, Relay estimates that the net proceeds of the flotation will total around $189.5 million. It did not specify how it will use the funds. The issue should close on Thursday, Sept. 12.
Singing the dilution blues
Prior to the issue, Relay had just under 134 million shares outstanding, according to data compiled by Yahoo! Finance. That means the new issue is at least 21% dilutive to existing stockholders, which is a relatively high figure even for the perennially cash-strapped biotech sector. It's little wonder investors reacted quite negatively to news of the issue.
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Why Relay Therapeutics Plummeted by Nearly 14% Today was originally published by The Motley Fool