Paradigm Biopharmaceuticals stock price falls 27% after cap was increased by $66 million
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That Paradigma Biopharmaceuticals Ltd (ASX:PAR) The stock price falls after emerging from a halt in trading this morning.
At the time of writing, shares of the biopharmaceutical company are trading at $1.45, down 26.95%.
What’s Driving Paradigm’s Share Price Down?
Investors are scrambling to sell off Paradigm stock in the face of an upcoming stock dilution at the company.
According to its announcement, Paradigm said it has launched a fully-guaranteed $66 million capital raise.
This includes a $45.7 million institutional placement to domestic and foreign investors and a prorated non-cancellable rights offering for 15 of $20.3 million at $1.30 per share.
The company noted that the placement received strong participation from domestic and overseas institutional investors. This will result in the issuance of approximately 35.1 million Paradigm shares.
The effective date for the subscription offer is Thursday, August 18, 2022.
Eligible shareholders who subscribe to their entitlement may also apply for additional shares as part of a top-up opportunity. However, this will be capped at 100% of an Eligible Shareholder’s entitlement.
The rights offering will result in the issuance of approximately 15.6 million shares.
Upon completion of the capital increase, the Company will have a pro forma cash position of $108.5 million. This will provide sufficient cash flow to sustain its operations into calendar 2024.
What are the funds used for?
Funds raised from the fundraising will be used to fund a number of initiatives including the following:
- Paradigm’s Phase 3 clinical program and new drug application (NDA) activities;
- activities related to business development;
- Activities related to product development (e.g. auto-injector); and
- working capital.
Paradigm chair Paul Rennie commented:
I would like to thank all of the institutional investors that participated in the placement and I am pleased that all Paradigm shareholders now have the right to also invest in the fully underwritten irrevocable rights offering.
Personally, I will be subscribing for $300,000 in new Paradigm shares in the rights offering. A strong balance sheet is important for Paradigm to maintain or accelerate the momentum of our Phase 3 clinical trial. A strong balance sheet is important as we have commercial talks going forward.
Paradigm stock price review
It’s been an interesting year for Paradigm stock, which was down for most of 2022 before shooting up recently.
The company’s share price hit its year-to-date high of $2.17 on Aug. 9 before halting trading the following day.
Based on today’s price, Paradigm has a market capitalization of approximately $332 million, with more than 228 million shares outstanding.