AVEO Pharmaceuticals, Inc. (NASDAQ: AVEO) had a strong run in the market earlier in the week as acquisition rumors took hold. Unfortunately however, the stock is down in a big way this morning after the company announced offering news.
Not only does the offering dilute current shareholders, it serves as a point of clarity when it comes to a potential acquisition. One that I am confident in saying isn’t going to happen any time soon. Today, we’ll talk about:
- The offering news and what it means for the takeover rumors;
- what we’re seeing from AVEO stock as a result; and
- what we’ll be watching for ahead.
AVEO Announces Offering Which Debunks Takeover Rumors
As mentioned above, AVEO Pharmaceuticals had a strong start early in the week this week. As rumors that AZN was interested in taking the company over for a price between $800 million and $1.2 billion surfaced, the stock ran for the top.
Nonetheless, if the company was about to be taken over, the last thing that it would consider is a public offering. With today’s news of a public offering from the company, the acquisition rumors have all-but-been debunked.
In a press release issued early this morning, AVEO said that it has commenced an underwritten public offering of shares of common stock, together with warrants to purchase shares of common stock. Moreover, the company has granted the underwriters a 30-day otpion to purchase up to an additional 15% of the number of shares of common stock and/or warrents to be sold in the offering at the public offering price minus underwriting discounts and commissions.
In the release, AVEO said that it intends on using the net proceeds from the offering for ongoing clinical and preclinical development of its product candidates. The company will also be using the funds for working capital and other general corporate purposes.
What We’re Seeing From The Stock
As investors, one of the first lessons that we learn is that the news leads to moves. When it comes to AVEO, the news proved to be incredibly negative. After all, no acquisition is likely to take place. Moreover, a dilutive transaction is upon us, and will likely strip current shareholders of meaningful amounts of value.
Considering this, it’s not surprising to see that upset investors are sending the stock tumbling down. As is just about always the case, our partners at Trade Ideas were the first to alert us to the movement. At the moment (8:49), AVEO is trading at $0.92 per share after a loss of $0.39 per share or 29.78% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on AVEO. In particular, we’re interested in following the company’s continued work to develop its list of pipeline products and provide value to investors. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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