After releasing the pricing details of a just-announced common stock offering, shares of Codexis (NASDAQ:CDXS), a company focused on protein engineering, fell as much as 13% in early morning trading on Friday. The stock recovered a bit but was still down 7% as of 10:25 a.m. EDT.
On Thursday morning, Codexis announced its intention to raise capital from a common stock offering. The pricing details were released just after the market closed and investors were not happy with them.
Codexis is selling 3.75 million shares of stock for a price of $9.25 per share. The underwriters of the deal are being granted a 30-day option to purchase up to an additional 562,500 shares of common stock at the public offering price. In total, this deal could raise up to $39.8 million before subtracting fees.
The only wrinkle here is that Codexis' stock closed on Thursday at $10.70 per share. This indicates that the company had to offer a substantial discount in order to attract enough attention from investors.
Given the pricing details, it isn't hard to figure out why shares are falling today.
Codexis produced a net loss of $23 million in 2017 and it ended the year with just $31 million in cash on its balance sheet. Those numbers suggest that a capital raise would be needed sooner rather than later. Given that shares have more than doubled over the last year, it seems like as good a time as any to do a common stock offering.
For 2018, management is projecting that revenue will grow at least 20% to $60 million. That should help the company's net loss to shrink considerably. What's more, market watchers project that the company will produce a net profit in 2019, so it is possible that this is the last time that the company will have to tap shareholders for cash.
Overall, this capital raise looks like it's coming at a good time and it should put Codexis on firmer financial footing. If you were bullish on Codexis yesterday, then I see no reason to change your tune today.