Please ensure Javascript is enabled for purposes of website accessibility

Why Esperion Therapeutics Plummeted by 11% Today

By Eric Volkman – Oct 25, 2021 at 5:51PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shareholders were displeased with the company's latest financial move.

What happened

Esperion Therapeutics (ESPR 3.95%) had a day to forget on Monday as its stock lost more than 11% on news that a fresh stack of shares would be coming to the market.

So what

Esperion announced Monday morning that it has entered into a private agreement with two holders of its convertible senior subordinated notes to convert those securities into common stock. In total, those investors hold notes with an aggregate principal value of $15 million.

Piggy bank with stethoscope.

Image source: Getty Images.

The number of shares those holders will receive in exchange for their notes "will be determined based upon the volume-weighted-average-price per share of Common Stock, subject to a floor of $5.62 per share, during the five trading-day averaging period, commencing on the trading day immediately following the date of the Exchange Agreement."

Investors might be concerned about the dilutive effect of the new stock being issued, as the company currently has a market capitalization of just under $209 million.

They might also be generally worried about Esperion's financial health. The biotech has been habitually loss-making, and while that's usually not a deal-breaker for investors in the sector, it also has considerable debt. For the second quarter, the company's interest expense was over $11 million, or almost 30% of the $40.7 million in revenue it booked for the period.

Now what

The bright-side view of Esperion's latest piece of financial engineering is that it will shave the company's interest costs, as the securities are being converted from what are essentially debt instruments into equity. But that might be cold comfort to shareholders hungry for more positive developments from the company.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.