Check-Cap (CHEK): Shoring Up the Balance Sheet by Selling Shares Comes with a Price

Shares of Check Cap (NASDAQ:CHEK) tumbled nearly 50% during Friday’s trading session. The culprit? Look no further than the announcement of an underwritten share offering before the opening bell.

The medical diagnostics firm priced 3,189,381 units at $5.50 apiece, a 38% discount from where the stock had been trading yesterday. Each unit contains one ordinary share and one Series C warrant to purchase one ordinary share. The ordinary shares and the accompanying Series C warrants included in the units can only be purchased together in this offering, but will be issued separately and will be immediately separable upon issuance. Each Series C warrant has an exercise price of $5.50 per share, and will expire five years from the date of issuance. The Series C warrants will be listed on the Nasdaq Capital Market under the symbol “CHEKZ”.

In connection with the offering, Check-Cap has granted the underwriter a 30-day option to purchase up to additional 478,407 ordinary shares and/or Series C warrants to purchase up to 478,407 ordinary shares.

In addition to that deep discount, the offering represents at least 30% dilution for existing shareholders.

That said, the offering did raise net proceeds of $15.5 million, which will allow the company to advance its research and development, clinical trials in Europe and the U.S., manufacturing capabilities, and working capital and other general corporate purposes.

The offering is expected to close on or about May 8, 2018, subject to satisfaction of customary closing conditions.

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