What happened

Shares of Pluristem Therapeutics (NASDAQ:PSTI) rose as much as 28.3% today after the company announced it had secured non-dilutive financing from the European Investment Bank (EIB) to support the development of treatments for COVID-19. The stem cell developer is eligible to receive up to $54 million (50 million Euros) in funding in three tranches, with the first $21.5 million expected to be distributed before the end of April. 

Pluristem Therapeutics can receive the second and third installments by achieving certain clinical, regulatory, and manufacturing milestones. It won't have to begin repaying the loan until April 2025. 

As of 1:08 a.m. EDT, the small-cap stock had settled to a 22.9% gain.

A group of ascending arrows on a chalkboard.

Image source: Getty Images.

So what

Today's financing announcement means Pluristem Therapeutics can hit the ground running to develop stem-cell based treatments for COVID-19. Importantly, it also means the company can limit dilutive fundraising transactions to support research and development (R&D) efforts. But investors might still expect a public stock offering to be conducted soon.

Pluristem Therapeutics expects the $54 million financing from EIB to cover up to 50% of R&D expenses related to its COVID-19 project. The business reported only $16 million in cash on its balance sheet at the end of 2019, which means it will need additional funding -- likely raised from public offerings of common stock -- if the project progresses. 

Now what

To be blunt, Pluristem Therapeutics is a stem cell stock that doesn't belong in your portfolio. The company sported a market valuation of only $60 million just a few weeks ago, but has climbed to $225 million on recent announcements that it was developing treatments for COVID-19. While fellow stem-cell developer Mesoblast reported promising results today from a small clinical trial, investors cannot extrapolate that to Pluristem Therapeutics. This remains a very risky stock.