Shares of biotechnology company AcelRx (ACRX) are tumbling – down nearly 17% as of this writing. The reason? AcelRx announced this morning that it will be selling at least 12,698,412 million shares of its own stock to raise cash for commercial launch of DSUVIA and for general corporate purposes.
Added to its current 60.6 million shares outstanding, this offering promises to dilute existing shareholders by at least 20% — nearly the same amount that the stock is down today.
Another reason investors may be selling off ACRX stock is the price at which these new shares are being offered. At $3.50 a share, AcelRx is offering new stock for a price that implies 19% below what its shares cost prior to the offering announcement.
On the other hand, these new shares won’t just raise the share count but they’ll also raise cash. AcelRx expects the sale of these new shares to help shore up its balance sheet by generating as much as $40 million in new capital.
In addition, AcelRx has granted the underwriters a 30-day option to purchase up to an aggregate of 1,904,761 additional shares of common stock at the initial public offering price, less the underwriting discounts and commissions.
In a research note issued Monday, B. Riley FBR analyst David Buck reiterated a Buy rating and $9 per share target for AcelRx shares following FDA approval for its drug DSUVIA for acute pain in a medically supervised setting. However, the analyst made it loud and clear: “We continue to model equity offerings in 4Q18 and 2Q19 to fund commercialization.” (To watch Buck’s track record, click here)
Net net, when it comes to analysts’ bets, the odds are on this biotech player, with TipRanks analytics showcasing ACRX as a Strong Buy. Out of 7 analysts polled in the last 3 months, 6 are bullish on AcelRx stock while only 1 remains sidelined. With a return potential of nearly 170%, the stock’s consensus target price stands at $8.67. (See ACRX’s price targets and analyst ratings on TipRanks)