Why Immunic Plummeted by 21% on Thursday

What happened

Clinical-stage biotech Immunic (NASDAQ:IMUX) was not immune to the market’s ire on Thursday. The company announced a planned new share issue that had many investors heading to the exits, and drove the stock down by more than 21% on the day.

So what

Immunic aims to raise gross proceeds of around $45 million by selling 4.5 million shares of common stock at $10 apiece in an underwritten public offering. That price is significantly under the $11.94 closing price of the stock on Wednesday.

Medical professionals conferring in a hospital lobby.

Image source: Getty Images.

The underwriting syndicate, led by Piper Sandler (NYSE:PIPR), has been granted a 30-day option to buy up to an extra 675,000 shares among themselves.

Immunic anticipates that this flotation will close on or about July 19. The biotech said it will use the funds raised to continue the development of its three product candidates, all of which are immunology treatments that could potentially be effective against a variety of afflictions including multiple sclerosis and Crohn’s disease.

The most promising of the trio, IMU-838, tested well in a phase 2 clinical trial evaluating its effect on relapsing-remitting multiple sclerosis.

Now what

While Immunic has certainly delivered good news for its investors in the past, a 4.5 million share issue is quite a big pill to swallow. The company’s share count, according to Yahoo! Finance, is under 21.8 million, so this secondary issue will cause current shareholders significant dilution. Hopefully for those investors who are hanging on or coming in on stock price weakness, Immunic will put those funds to productive use.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/07/15/why-immunic-plummeted-by-21-on-thursday/

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