Diffusion Pharmaceuticals Inc (DFFN): Shoring up the Balance Sheet by Selling Stock Comes with a Price
Shares of clinical-stage biotechnology company Diffusion Pharmaceuticals Inc (NASDAQ:DFFN) are crashing – down nearly 40% as of this writing. The reason? Diffusion announced this morning that it will be selling at least 15 million shares of its own stock to raise cash for research and development of the company’s lead product candidate, transcrocetinate sodium, including clinical trial activities, and for general corporate purposes.
Each share of common stock is being sold together with a common warrant to purchase one share of common stock at a combined effective price to the public of $0.80 per share and accompanying common warrant. The common warrants will be exercisable at an exercise price of $0.80 per share and will expire five years from the date of issuance.
The Company has also granted the underwriter a 30-day option to purchase up to 2,250,000 additional shares of common stock and/or additional warrants to purchase up to 2,250,000 shares of common stock, at the public offering price, less underwriting discounts and commissions.
Added to its current 14.52 million shares outstanding, this offering promises to dilute existing shareholders by at least 100%. Another reason investors may be selling off Diffusion stock is the price at which these new shares are being offered. At $0.80 a share, the company is offering new stock for a price 28% 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. Diffusion expects the sale of these new shares to help shore up its balance sheet by generating $12 million in new capital, before deducting the underwriting discounts and commissions and other estimated offering expenses payable by Diffusion, assuming no exercise of the underwriter’s option to purchase additional securities and none of the warrants issued in this offering are exercised.
The offering is expected to close on or about on January 22, 2018, subject to the satisfaction of customary closing conditions.
Diffusion is a clinical stage company which engages in the provision of oncology-focused biotechnology. It involves in research and development, and manufacture of drug products for the treatment of cancer in combination with radiation and chemotherapy.