Shares of Invitae (NVTA -1.78%) fell as much 14.4% today, then gained as much as 13.2%, after the company announced the pricing of a public offering of common stock. The genetic testing company will offer up to 20.4 million shares at $9 each. The offering will raise up to $184 million in gross proceeds.
Investors are reacting to the dilution from the stock offering, the relatively low offering price (shares traded above $18 for most of 2019), and broader market volatility during the coronavirus pandemic. As of 1:41 p.m. EDT today, the growth stock had settled to a 0.9% gain.
Invitae began the year with $391 million in cash, cash equivalents, and marketable securities on its balance sheet, but the high-growth company consumes cash quickly. The business reported a full-year 2019 operating loss of $244 million. It also made multiple acquisitions in the first quarter of 2020 that must be paid for in a combination of cash and stock.
Investors have accepted significant operating losses and dilution as the cost of growth in recent years, but they are hastily adjusting their appetites for risk as a consequence of the coronavirus pandemic. That suggests the growth-at-all-costs business model of Invitae and many other companies is going to require quick adjustments, too. Unfortunately, companies cannot change course as quickly as investor sentiment.
Invitae is raising cash to help it navigate the upcoming period of uncertainty. But now is not a great time for a public offering of common stock, and the pricing of the April offering reflects that reality. It would behoove the company to sharply reduce operating losses, too, but there are only limited options available in such a compressed timeline. Therefore, investors should brace for continued volatility.