Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Pieris Pharmaceuticals Inc. Is Tanking

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
344%
 
S&P 500 Returns
120%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.