Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Ziopharm Oncology Fell as Much as 14.0% Today

By Maxx Chatsko - Feb 5, 2020 at 11:11AM

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

The small-cap pharmaceutical company announced the pricing of a public stock offering.

What happened

Shares of Ziopharm Oncology (ZIOP -8.46%) fell 14% today after the company announced and priced a public stock offering. The business will sell up to 32 million shares of common stock at $3.25 apiece, which could generate gross proceeds of up to $104 million. 

The fundraising efforts will support a balance sheet that held about $88 million in cash at the end of September. However, Ziopharm is a prerevenue company that reported an operating loss of $42 million in the first nine months of 2019, which means it will continue to burn cash for the foreseeable future. 

As of 10:37 a.m. EST, the pharma stock had settled to a 13.3% loss.

An angry fist pounding a table while a declining stock chart displays on a tablet.

Image source: Getty Images.

So what

The public stock offering is a little surprising. When the company reported third-quarter 2019 operating results in November it claimed to have enough cash to support operations into the first half of 2021. It's a bit strange to raise more funds, especially considering no major developments have occurred in the three months since that statement was made. 

What's more, the $88 million cash position at the end of September was driven in part by the exercise of warrants from existing shareholders in July. Those transactions resulted in gross proceeds of $52 million, but also diluted shareholders.

Now what

Ziopharm will certainly need to maintain a healthy cash balance to fund the development of its three drug candidates and seven clinical programs. However, the company has nearly doubled the number of outstanding shares in the last five years. The stock has tumbled 59% in that span. Investors will learn more about management's rationale for conducting the stock offering when the company reports fourth-quarter and full-year 2019 operating results in the coming weeks. 

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

ZIOPHARM Oncology, Inc. Stock Quote
ZIOPHARM Oncology, Inc.
ZIOP
$1.19 (-8.46%) $0.11

*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
323%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

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.