Shares of biotechnology company TrovaGene Inc (NASDAQ:TROV) are collapsing – down nearly 40% as of this writing. The reason? TrovaGene announced this morning that it will be selling at least 15 million shares of its own stock to raise cash for “research and development activities and for working capital and 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 $0.30 per share and accompanying common warrant. The common warrants will be exercisable immediately at an exercise price of $0.30 per share and will expire five years from the date of issuance.
Added to its current 38.11 million shares outstanding, this offering promises to dilute existing shareholders by at least 40% — coincidentally, about the same amount that the stock is down today.
Another reason investors may be selling off TrovaGene stock is the price at which these new shares are being offered. At $0.30 a share, TrovaGene is offering new stock for a price 30% 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. TrovaGene expects the sale of these new shares to help shore up its balance sheet by generating as much as $4.1 million in new capital, excluding the proceeds, if any, from the exercise of the warrants
On the ratings front, Maxim Group analyst Jason Kolbert downgraded TROV to Hold, in a report issued on November 10. According to TipRanks.com, Kolbert has a yearly average loss of 7.8%, a 34% success rate, and is ranked #4635 out of 4717 analysts.
Trovagene is a clinical-stage, precision medicine oncology therapeutics company. Its focuses on developing PCM-075, is a Polo-like Kinase 1 (PLK1) selective adenosine triphosphate (ATP) competitive inhibitor. The company was founded by Gabriel M. Cerrone, L. David Tomei, Samuil Umansky and Hovsep Melkonyan on August 4, 1999 and is headquartered in San Diego, CA.