Why Zeltiq Aesthetics Inc. Shares Soared Again

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 Zeltiq Aesthetics (NASDAQ: ZLTQ  ) are enjoying their third day of double-digit gains in the past two weeks today, after the company announced a secondary offering of 4.5 million shares held by several venture capital firms. Shares are up 15% as of this writing, but have held steady at a minimum 14% gain all afternoon.

So what: Last night, Zeltiq filed a prospectus to sell shares, as mentioned earlier. The timing is fortuitous for the offering parties, as the company is coming off of a huge earnings beat at the end of October. Zeltiq itself won't benefit from this sale, as the selling stockholders are: Advanced Technology Ventures, Aisling Capital, and Venrock Associates. Advanced owned 22% of the company's shares prior to the offering; Aisling owned 11%; and Venrock owned 17%. After reducing their stakes, the three companies will have new stakes of 12%, 10%, and 15%, respectively. Current shareholders won't be diluted, which could explain why there's so much excitement today -- more than seven times the normal number of shares have already traded today, but the stock's volume of 2.8 million shares doesn't fully account for the offering.

Now what: What's unusual about this response is that the 4.5 million shares were offered at a price of $13 per share, and the offering's underwriters can purchase up to 675,000 more shares within 30 days. The stock's current price of roughly $15.60 represents a 17% premium over that offering price, so today's buyers are either absolutely certain in Zeltiq's long-term potential or are headed for a rough patch once these lower-priced shares hit the market. The company's last earnings report certainly gave investors a lot of reason for excitement, but this pop seems a bit out of place. That doesn't mean it's a bad buy, but you should make sure to keep your eye on this company to flesh out your investing thesis, if you're not already doing so.

Want more news and updates? Add Zeltiq Aesthetics to your watchlist now.

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