What happened
Shares of Guardant Health (GH -1.42%) fell over 10% last month, according to data provided by S&P Global Market Intelligence. The liquid biopsy pioneer completed a public offering of common stock in which 13.2 million shares changed hands at $84 apiece. However, the business sold only 4.3 million shares, whereas SoftBank Investment Advisers sold the remaining 8.9 million shares.
Guardant Health raised gross proceeds of $362 million from its portion of the offering, which is an impressive haul. Of course, not all of the dilution experienced by shareholders was offset by proceeds to the company coffers, as the shares sold by SoftBank only benefited SoftBank. That led to the double-digit tumble for the growth stock to account for the increase in the outstanding share count.
Image source: Getty Images.
So what
The coronavirus pandemic has exacerbated financial headwinds for SoftBank, which has discovered the hard way that throwing hundreds of millions, or billions, of dollars at hyped-up start-ups doesn't guarantee returns. Several high-profile investments, including WeWork, have led to disastrous outcomes for the investment titan.
Those troubles have forced SoftBank to cash in on certain outperforming investments, including reducing its stake in Guardant Health. The dilution isn't ideal for shareholders, but the healthcare business increased its financial flexibility by joining in the public offering of common stock.
Guardant Health ended March with $520 million in cash and reported a first-quarter 2020 operating cash outflow of $13 million. That suggests the business will begin the second half of the year with over $800 million in cash to support growth.
Now what
Despite a rough June, investors have little to complain about. Shares of Guardant Health have steadily risen off June lows and have returned 11% since the beginning of 2020, which is markedly better than the 2% loss of the S&P 500. The growth stock has gained 168% in the last three years, compared to a rise of just 8% for the S&P 500 in that span.
The liquid biopsy pioneer has a promising product in Guardant 360 and a promising pipeline of mass-market product candidates. Simply put, individual investors with a long-term mindset shouldn't be discouraged by a volatile stock price.
