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Why Phreesia Stock Is Flying Higher Today

By Keith Speights – Oct 21, 2020 at 12:59PM

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Investors are confident about the company's prospects after its strong secondary stock offering pricing.

What happened

Shares of Phreesia (PHR 1.40%) were flying 11.2% higher as of 11:11 a.m. EDT on Wednesday. The big jump came after the company said that it will price the previously announced public offering of 5 million shares at $32 per share.

So what

It's common for a company's share price to fall when the pricing of a secondary offering is announced. And Phreesia's share price did open lower yesterday after the company announced after the market close on Monday that it planned a secondary stock offering. But the healthcare stock quickly bounced back on Tuesday and is enjoying even stronger momentum today. Why?

Two healthcare professionals wearing face masks, looking at a PC monitor

Image source: Getty Images.

For one thing, Phreesia priced its offering at only a little under its Tuesday closing price of $32.52 and even closer to its Monday closing price of $32.32. The offering price of $32 is quite high considering that selling 5 million shares will dilute the value of existing shares by around 13%.

Most important, though, is what this strong secondary offering price represents: investors' confidence in Phreesia's business prospects. The company operates the leading patient intake management platform. Its revenue jumped 14% year over year in the second quarter despite the headwinds from the COVID-19 pandemic. The net proceeds of around $151.6 million generated from the stock offering will enable Phreesia to expand its business further.

Now what

Phreesia could sell even more shares. The company granted the underwriters of its secondary stock offering an option to buy up to 750,000 additional shares. This option must be exercised within 30 days of the close of the offering, which is expected to happen on Oct. 23, 2020. If this option is exercised in full, it will net Phreesia another $22.8 million.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Phreesia, Inc. The Motley Fool has a disclosure policy.

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