What happened
Shares of Amyris (AMRS +0.00%) dropped by double digits today after the company announced that certain shareholders and warrant holders were exercising their warrant rights to collect a total of 10.5 million shares of common stock. That transaction will provide approximately $46 million in proceeds to the synthetic biology pioneer before taxes and fees.
However, most of those shareholders aren't sticking around very long. After collecting their shares from the warrant exercise, the participants will turn around and sell up to 8.8 million shares of common stock at a price of $6.25 apiece. Amyris will not receive any proceeds from that offering because, well, it isn't the entity selling that batch of common stock.
As of 11:16 a.m. EDT, the stock had settled to a 11.6% loss.
Image source: Getty Images.
So what
For a company that has prepared its last several quarterly reports with a "going concern," meaning auditors felt there was significant doubt in the business' ability to continue operating, a cool $46 million in gross proceeds will certainly help. Amyris exited June with just $14 million in cash and cash equivalents on hand, and lost $38 million from operations in the first half of 2018.
But long-term shareholders may be rolling their eyes at today's news of more dilution. The company once had 286 million shares of common stock outstanding. That was reduced to 19 million following a reverse stock split, but after the recent warrant exercise, that tally will now settle near approximately 63 million shares.
Now what
Investors may not be complaining that much, as Amyris stock had more than doubled since the beginning of the year prior to the offering, and is still up a healthy 75% after today's drop. But there are some troubling red flags about the business investors will want to consider. Given the lack of traction in the marketplace, the fact that the business had a shareholders' equity balance of negative $250 million at the end of June, and a history of not creating value for shareholders over the long term, I think investors should stay away from this synthetic biology stock.
