Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Ampio Pharmaceuticals, Inc. (NYSEMKT: AMPE ) , a biopharmaceutical company focused on developing therapies to treat metabolic, eye, kidney, and chronic inflammation diseases, jumped as much as 13% after announcing a $25 million in fresh financing.
So what: According to Ampio's press release, it will be selling 4.6 million shares to a limited number of investors (mostly institutional investors), who will be able to purchase Ampio at a substantial discount of $5.50 per share. The gross proceeds will be $25 million, which, after taxes, will practically double the company's existing cash balance of $12.5 million. The offering should be completed by the end of the month.
Now what: Normally, share offerings are bad news, but investors seem to be excited about the fresh cash for two reasons. One, the new shares, though discounted, are being gobbled up by institutional investors, which would be a sign that Wall Street sees promise in Ampio's pipeline. Second, it provides much-needed cash for a company still in the clinical stage of its development. In other words, a secondary offering of some form was expected, and this is pretty much the best outcome. I've felt for a while that Ampio could represent an intriguing investment opportunity and would certainly encourage biotech-savvy investors to add it to their Watchlist.
Don't forget about this winning investment strategy
Day traders are certainly loving the bump higher in Ampio today, but its cash-burning ways serve as a constant reminder that the best investment strategy is to pick great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.