What happened

CRISPR Therapeutics AG (NASDAQ:CRSP), a small-cap contender in the red hot gene-editing race, saw its shares rise by more than 19% in early morning trading today on over 10 times the average daily volume.

What's behind this eye-popping surge? Taking the long view, I think investors are basically starting to wake up to the enormous potential of this fledgling technology. CRISPR's shares, after all, have been steadily climbing over the past month, following its licensing deal with Vertex Pharmaceuticals (NASDAQ:VRTX)and subsequent upgrade from Piper Jaffray. 

A gloved hand removing a segment of DNA.

Image source: Getty Images.

So what

The head-scratching part about CRISPR's double-digit rise today, though, is that it's occurring in the face of a sizable secondary offering. Specifically, the company announced a underwritten public offering of 5,000,000 of its common shares at a public offering price of $22.75 per share before the start of today's session.

Under normal circumstances, a secondary offering that equates to a capital raise of $113.75 million would absolutely tank a small-cap biotech's share price -- especially when it's priced below the previous day's closing price like this one (CRISPR's shares closed yesterday at a price of $23.91). Apparently, CRISPR's stock is now immune to market norms because of the growing interest in gene therapy in general, and novel gene-editing platforms in particular.  

Now what

While CRISPR's decision to extend its cash runway during a period of rapid share price appreciation -- and right after gaining a form of validation via its collaboration with Vertex -- was undoubtedly a smart move, I'd caution against buying into the hype just yet.

CRISPR's lead clinical candidate -- CTX001, indicated for the treatment of beta-thalassemia and sickle cell disease -- is still years away from a regulatory filing. Eventually, CRISPR's shares will revert to the mean during what will certainly be a lengthy trialing process for CTX001, so more attractive entry points should present themselves in the next few years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.