ZIOP secondary $50M offering at $5.15/sh

https://finance.yahoo.com/news/ziopharm-oncology-announces-p…

BOSTON, May 12, 2017 (GLOBE NEWSWIRE) – ZIOPHARM Oncology, Inc. (ZIOP), a biopharmaceutical company focused on new immunotherapies, today announced that it has priced an underwritten follow-on offering of 9,708,738 shares of its common stock at an offering price of $5.15 per share to a single institutional investor, before underwriting discounts and commissions. All of the shares are being offered by ZIOPHARM.

Proceeds to ZIOPHARM from this offering are expected to be $50 million, before deducting underwriting discounts and commissions and estimated offering expenses. ZIOPHARM intends to use the net proceeds from the offering for general corporate and working capital purposes, including the advancement of its clinical programs…

1 Like

I saw this earlier today. You would think news like this would hammer the stock but it is actually up over 4% as of right now. weird. Thought maybe I would pick some up for under $6 a share today. Looks like that is not happening. Is there other news boosting the stock?

There was an article online earlier this morning that said the stock price was down 12% on the news. And it looks like the lowest price today was about $6.10 or so. I haven’t seen any news other than that. But the share price has certainly bounced back from the today’s low.

Financial risk (them running out of cash) as been alleviated. The 7% dilution is probably less important to investors.

3 Likes

Financial risk (them running out of cash) as been alleviated. The 7% dilution is probably less important to investors.

I wonder if this means the hopes for ZIOP being bought by another company have been dashed. My recollection is that that was one of the anticipated (hoped for?)outcomes previously expressed on this board.

The first trade or two at opening were in the -12% range. Robo-trades, I presume. Bounced back pretty quick to the -2% range and grew from there.

From a value perspective, the “dilution” impact to the share price should be small in net. If the new shares were purchased at market value, existing shareholders would be getting a slightly smaller piece of a slightly bigger pie (the company now has $50M in extra capital), so proportionally net neutral. These shares were actually purchased at a discount, so the “cost” of the discount is spread among the existing shareholders, which theoretically lowers the price by each share’s load of the discount in proportion to the additional capital (one could calculate this pretty easily … but it’s only theoretical and it’s Friday afternoon, so I shall not).

The bigger impact to the stock price reflects what the shareholders believe the company will do with the extra capital. If they believe the extra capital will provide a positive return, share price could increase, even after accounting for the increased dilution. If the company is bleeding cash for no good reason (maybe it’s a failing retailer, for example) and shareholders believe it’s throwing good money after bad, share price could decrease because they now own a smaller piece of a shrinking pie.

ZIOP seems a bit of both today, but mostly the former. Yes, running low on cash … but for a good (arguably) reason (R&D). And shareholders believe the extra $50M will solve the near-term cash problem, then turn into enough future return to not just make up for the dilution loss but exceed it. Time will tell, but today’s buyers took the positive end of that bet.

As for this dashing hopes for an impending buyout … If ZIOP’s board is considering such an exit, this added cash cushion gives them a stronger bargaining position. That might scare away a bargain-hunter and delay a transaction. Or increase the price of a future transaction down the road. Probably both, if acquisition is the ultimate exit.

They call me,
MrTBS

7 Likes

I wonder if this means the hopes for ZIOP being bought by another company have been dashed. My recollection is that that was one of the anticipated (hoped for?)outcomes previously expressed on this board.

Not necessarily but it does mean that they won’t be forced to accept a low ball offer just because they are having a cash crunch. Better to have an approach offer when you are in a position of strength!

A

3 Likes

MrTBS,

Thank you for your cogent analysis of ZIOP and the ramifications for share holders.

Have you taken a position in this stock? If so, what percentage of your portfolio have you allotted for ZIOP?

Thanks!

Jim

I have a very small position in ZIOP. Entered about a month ago, then added a little more on the KITE-induced drop.

It’s been quite a while since I’ve invested in these little biotechs. I’d forgotten what a wild roller coaster ride they can be. A small position is all my heart can handle!

They call me,
MrTBS

1 Like