What happened

Shares of Pulmonx (LUNG 0.13%) were crashing 53.7% lower as of 11:36 a.m. ET on Friday. The company announced its third-quarter results after the market closed on Thursday. However, Pulmonx's Q3 performance wasn't the primary culprit behind its stock plunging today.

Instead, investors reacted negatively to the company's regulatory filing to the U.S. Securities and Exchange Commission (SEC) on Thursday related to a planned securities offering. Pulmonx intends to sell up to $200 million of securities, potentially including stock, debt, and/or warrants, over time.

So what

The massive sell-off of the healthcare stock was due to the scale of the anticipated dilution that could be on the way. Pulmonx's planned $200 million offering represents around 40% of the company's market cap before the SEC filing.

With cash, cash equivalents, and marketable securities of $156.9 million as of Sept. 30, 2022, Pulmonx doesn't need to raise $200 million of additional capital right now. But the company doesn't appear to be on the path to profitability anytime soon.

Pulmonx reported Q3 revenue of $13.5 million, up only 2% year over year. Sales of its Zephyr Valve, an implantable device used to improve breathing for emphysema patients, aren't gaining tremendous momentum. However, the company narrowly beat the consensus analysts' earnings estimate with its Q3 net loss of $14.2 million, or $0.38 per share.

Now what

Pulmonx's Zephyr Valve sales could gain some traction going forward. The Japanese Ministry of Health, Labour and Welfare recently agreed to approve the device. Pulmonx also reported positive data from two studies that suggest its AeriSeal system, which uses polymer-based foam to block diseased regions in the lung, could enable Zephyr Valves to be used in a broader group of emphysema patients.