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Why Guardant Health Shares Fell Today

By Keith Speights - Mar 2, 2020 at 3:55PM

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A regulatory filing could mean that a dilution-causing stock offering is on the way.

What happened

Shares of Guardant Health (GH -4.04%) were falling 9.6% lower as of 3:40 p.m. EST on Monday. The decline came after the liquid biopsy leader filed a shelf registration statement with the Securities and Exchange Commission (SEC). Shelf registration statements are used to register a future public stock offering without having to specify details of how many shares will be sold and exactly when they will be offered for sale.

So what

It's neither surprising nor concerning that Guardant Health filed with the SEC to conduct a public stock offering at some point down the road. The healthcare stock has more than doubled since early 2019 and is holding up pretty well despite the overall market uncertainty this year. The company also still isn't profitable yet, so raising cash through stock offerings is an easy way to fund operations until it reaches breakeven.

Drop of blood in a test tube with other test tubes close by

Image source: Getty Images.

The downside to stock offerings, though, is that they dilute the value of existing shares. Today's decline seems to reflect that investors are banking on Guardant Health issuing new shares sooner rather than later.

That might not be the case, however. Guardant reported cash, cash equivalents, and marketable securities totaling $791.6 million as of Dec. 31, 2019. This should be enough to carry the company for several years.

Now what

Guardant Health posted 87% year-over-year revenue growth in the fourth quarter of 2019. Its growth rate could slow quite a bit this year, though, with the company forecasting 31% year-over-year growth at the midpoint of its full-year 2020 revenue guidance. But with the prospects for its Lunar-1 and Lunar-2 liquid biopsies in detecting cancer at early stages and monitoring for cancer recurrence, the long-term prospects continue to look very good.

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