What happened
Shares of gene editing leader Editas Medicine (EDIT +2.64%) rose nearly 16% Monday on heavy trading volume, most of which occurred shortly after the market opened. The number of shares traded in the first few minutes of trading exceeded the daily average trading volume.
There was no major announcement. Instead, Editas Medicine decided to payoff a promissory note issued to the Broad Institute, the holder of its gene editing patents, by issuing shares of common stock on Friday, Aug. 4 that became the property of the research institution. The maximum conversion price was $21.49 per share, which was significantly higher than the recent stock price, and it appears the shares were sold Monday morning at that higher price. Therefore, the company's stock received a little boost.
Despite the honest explanation with almost no significance to Editas Medicine (it didn't receive proceeds from issuing the shares to the Broad Institute), the gains managed to stick around. As of 3:21 p.m. EDT, the stock had settled to a 10.6% gain.
Image source: Getty Images.
So what
In early March, Editas Medicine granted the Broad Institute and Wageningen University promissory notes worth 800,000 shares of common stock related to licensing fees for specific gene editing patents. The notes were convertible to shares at the company's discretion or after 150 days. Since early August is about 150 days after early March, it appears the latter took place.
It's worth pointing out that the Broad Institute was issued 271,347 shares of common stock a few days ago. That's substantially less than the 800,000 shares spelled out in the March filing. However, it's not easy to tell if the balance was given to others named in the filing or if the research institution negotiated a lower payment from Editas Medicine.
Either way, the fact that the Broad Institute unloaded its shares from the converted promissory note is hardly worrisome. After all, the research institution is simply realizing a licensing fee from Editas Medicine. Monday's pop is nothing more, nothing less.
Now what
Sometimes there are simple reasons for major stock movements. That is certainly the case with Editas Medicine stock on Monday. But there's good news for investors hoping that more actionable events were the driver of Monday's pop: The gene editing pioneer announces second-quarter 2017 earnings this Wednesday, Aug. 9. That should provide more timely information for shareholders that cannot get enough updates.
