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Why PAVmed Stock Plummeted on Wednesday

By Eric Volkman – Dec 22, 2021 at 6:16PM

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News of a fresh round of capital raising seems to be making some investors ill.

What happened

Specalty medical-device maker PAVmed (PAVM -0.42%) didn't make for a great stock on Wednesday. The company's shares were rocked by an investor sell-off that sent their price down by nearly 13%. This followed the announcement of a new financing effort.

So what

PAVmed filed a shelf-registration statement with the Securities and Exchange Commission earlier in the day. This is a document that reveals that a company intends to raise financing through the issuance of new equity, debt, or a combination of the two.

Person looking unhappy as they sit on a couch with a blanket around them and gaze at a thermometer.

Image source: Getty Images.

In PAVmed's case, it's aiming to float $275 million worth of one or more of: common stock, preferred stock, warrants, debt securities, and units (i.e., a combination of at least two of the preceding types of securities). It didn't provide any specific timing for such an issue or issues. 

The company was circumspect about how these monies will be used. It only said that they are to be utilized "for woking capital and other general corporate purposes," which is boilerplate language commonly used in such documents.

It added that, "Any specific allocation of the net proceeds of an offering of securities to a specific purpose will be determined at the time of a particular offering." This doesn't exactly shine a light on its intentions.

Now what

While shelf registrations and their vagueness are nothing new for investors, these folks tend to get concerned if a proposed issue (or issues) are outsized for their investment.

With PAVmed, they're probably worried that any considerable debt flotation will unbalance the company's balance sheet, as it had no long-term borrowings as of the end of September. On the equity side, significant shareholder dilution could be in the cards -- PAVmed's total market cap is currently only $236 million.

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.

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