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Why Oncocyte Shot 13% Higher Today

By Eric Volkman - Feb 5, 2021 at 6:06PM

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The announcement of a new share issue usually drives a stock's price down, after all.

What happened

Cancer diagnostics specialist Oncocyte (OCX -8.86%) rose at a double-digit pace on Friday on news that it's tapping the stock market for a new round of capital-raising.

So what

Oncocyte priced its previously announced underwritten secondary stock issue of 7.78 million shares at $4.50 apiece. If all goes well, this should bring in gross proceeds of roughly $35 million. The underwriters have a 30-day option to buy nearly 1.17 million additional shares at the offering price. The issue should close on or about Tuesday, Feb. 9.

Closeup of an IV drip.

Image source: Getty Images.

New share flotations tend to make investors nervous, as they are dilutive.

However, in this case the impact of the incoming stock will be relatively light. Fewer than 9 million shares in total are being floated, while Oncocyte currently has over 428 million shares outstanding.

Also, the company is being very purposeful about this flotation. It says it intends to use its share of the proceeds to market and develop testing products aimed at identifying the most appropriate treatments for cancer patients. The money could also be utilized for more acquisitions of complementary assets, such as its recently announced purchase of the key assets of peer diagnostics specialist Chronix Biomedical.

Now what

The combination of a relatively low-impact share issue and Oncocyte's solid reasons for floating it have clearly inspired confidence. On Thursday, the healthcare stock closed 13% higher at $6 per share. This is well above the new issue's pricing, so investors are obviously excited about the company's prospects.

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