Shares of gene sequencing specialist Pacific Biosciences of California (PACB 2.92%) are trading higher on Wednesday following the company's announcement that it will receive an investment from Softbank Group (SFTBF -0.61%). As of 12:13 p.m. EST, Pacific Biosciences' stock is up by 18.3% after rising by as much as 31.2% earlier in the day.
Through one of its subsidiaries, Softbank Group will make a $900 million investment in Pacific Biosciences in the form of senior convertible notes. The notes will have a conversion price of $43.50 per share of the company's common stock, representing a 10% premium over Pacific Biosciences' share price as of the end of yesterday's trading session.
This helps explain, at least in part, why investors are enthusiastic about this deal. The notes will carry an interest rate of 1.5% per year and will mature on Feb. 15, 2028, unless they are converted into shares of common stock on an earlier date.
The investment suggests that Softbank Group has high hopes for Pacific Biosciences' future. "We believe that [Pacific Biosciences'] HiFi sequencing will be the de facto standard tool for population genomics fundamentally altering the practice of healthcare," said Akshay Naheta, CEO of Softbank Management.
Should investors be equally bullish on Pacific Biosciences? It is worth noting that the healthcare company has had a noisy past year. First, a merger attempt between Pacific Biosciences and Illumina (ILMN 3.24%) fell through in early 2020. Second, the pandemic disrupted Pacific Biosciences' business and hurt its financial results.
Third, the company made some notable changes to its leadership team last year. Looking forward, Pacific Biosciences is counting on several of its products to help it deliver excellent performances, including the Sequel IIe gene-sequencing system it launched last year.
This system is cheaper and more accurate than its predecessors. With that as an overview, while Pacific Biosciences is worth considering, I'd wait until after the pandemic subsides to initiate a position.