Please ensure Javascript is enabled for purposes of website accessibility

Why Codexis, Inc. Stock Is Tumbling Today

By Brian Feroldi – Apr 6, 2018 at 11:08AM

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 plunged after the company announced the pricing details of a common stock offering.

What happened

After releasing the pricing details of a just-announced common stock offering, shares of Codexis (CDXS -1.98%), 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. 

So what

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.

Candlestick chart and bar graph

Image source: Getty Images.

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.

Now what

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.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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

Codexis, Inc. Stock Quote
Codexis, Inc.
CDXS
$5.94 (-1.98%) $0.12

*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 analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

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.