What happened

After Novavax (NVAX 8.40%) shared the pricing details of its just-announced common stock offering, shares the clinical-stage biotech focused on vaccines fell 14% as of 10:22 a.m. EDT on Thursday.  

So what

Novavax announced that it has sold 30.3 million shares of common stock to the public at a price of $1.65 per share. The underwriters of the deal are also being granted a 30-day option to purchase an additional 4.5 million shares of stock. In total, this deal could raise up to $57.4 million before subtracting fees.

Unfortunately, Novavax's stock closed Wednesday's trading session at $2.08 per share. The $1.65 offering price shows that management had to offer investors a huge discount in order to attract enough demand.

Given the pricing information, it isn't hard to figure out why shares are plunging today.

Paper cutout of and arrow pointing up and down, with question mark above.

Image source: Getty Images.

Now what

Novavax ended 2017 with $157 million in cash in its bank account, but it also set fire to $184 million during the last 12 months. Those numbers suggest that another capital raise was inevitable (and probably won't be the company's last, either). 

If you are looking for a bright spot here, it appears that management is timing this capital raise well. The company's share price is still up about 45% year to date, even if you include today's plunge, so it seems like a decent time to tap shareholders for capital. The rise is largely being driven by the company's upbeat results from a phase 1 trial using the company's experimental flu vaccine. Investors are also eagerly waiting for the release of interim data from a late-stage study evaluating the company's RSV vaccine for use in infants via maternal immunization. Those results should be out by the middle of the year.

Should opportunistic investors think about taking advantage of this dip? While it is possible that today's drop could be a buying opportunity, my firm answer to that question is no. Novavax has been a perennial disappointment for long-term investors, and the company is expected to remain in cash-burning mode for the foreseeable future. That's a situation that I want no part of.