What happened

Shares of Athersys (NASDAQ:ATHX) rose over 29% today after Bank of America (BofA) Securities initiated coverage of the stem cell specialist with a buy rating and a $5 price target.

Considering the stock remains under $3 per share even after today's jump, that implies significant upside if the bullishness of BofA Securities proves correct. However, individual investors can't overlook one big conflict of interest. 

As of 1:03 p.m. EDT, the small-cap stock had settled to a 27.7% gain.

A swarm of white paper airplanes being led higher by a red paper airplane.

Image source: Getty Images.

So what

On April 20, Athersys announced a public offering of common stock. The business intended to sell up to about 25.5 million shares of common stock at $2.25 apiece. 

Stock offerings are relatively straightforward: A company issues shares at a predetermined price, investment banks (called "underwriters") agree to purchase the shares at that price, and then the underwriters work to sell the shares to institutional investors and the public. If the underwriters sell the shares for a higher price than purchased during the stock offering, then they collect the difference as profit. 

Well, BofA Securities was the lead underwriter, called "book-running manager," for the April offering. It agreed to purchase 55% of the total maximum offering at $2.25 per share. Today, a little over a month later, it initiated coverage and announced a price target of $5 per share.

Now what

Considering Athersys has failed to commercialize its MultiStem product candidate in the last decade-plus of development and the possible conflict of interest for BofA Securities, the timing of initiating coverage at $5 per share is something individual investors might want to take note of. Put another way, the stem cell stock's trajectory will be determined by outcomes from clinical trials, not what Wall Street analysts project in research notes to clients.