Shares of Ziopharm Oncology (NASDAQ:ZIOP) 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.
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.
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.