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Here's Why Pieris Pharmaceuticals Inc. Is Tanking

By Brian Feroldi - Feb 14, 2018 at 12:14PM

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Shares drop after the company announces the pricing details of a common stock offering.

What happened

After the company revealed the pricing details of its recently announced common stock offering, shares of Pieris Pharmaceuticals (PIRS 2.37%), a clinical-stage biotech focused on cancer and other diseases, fell 12% as of 11:15 a.m. EST on Wednesday.

So what

On Tuesday, Pieris made known its intention to raise capital from a secondary common stock offering. That decision makes sense since the company's share price recently jumped after it announced a new collaboration deal with Seattle Genetics (SGEN 2.12%). What's more, Pieris' stock rocketed 437% higher in 2017, so right now seems like a great time to tap shareholders for cash.

However, investors learned today that the company succeeded in selling 5.5 million shares to the public, but the $8-per-share price represents a sharp markdown from Tuesday's closing price of $9.45. That hints that Pieris had to offer a discount in order to attract enough interest from the market. 

A man in a black suit holding gold coins that are falling through his fingers

Image source: Getty Images.

As usual, the underwriters of the deal were granted the option to purchase an additional 825,000 shares at the $8 offering price. In total, this deal could add another $50.5 million to Pieris' bank account before subtracting underwriting discounts and commissions. The deal is expected to close on Feb. 16, 2018.

Given the pricing news, it isn't hard to figure out why Pieris' stock took a step back today.

Now what

While dilution is never fun, it's hard for me to blame Pieris' management team for wanting to pad its balance sheet while it can do so at advantageous prices. When adding this capital raise to the $30 million up-front payment that it just received from Seattle Genetics, Pieris' should have plenty of capital on hand to fund itself for at least several more years. I think that fact provides risk-loving investors with yet another reason to give Pieris' stock a closer look.

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Stocks Mentioned

Pieris Pharmaceuticals, Inc. Stock Quote
Pieris Pharmaceuticals, Inc.
$1.73 (2.37%) $0.04
Seagen Inc. Stock Quote
Seagen Inc.
$141.39 (2.12%) $2.93

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