BG Medicine (BGMD) Declines On Dilution Fears

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BG Medicine, Inc. (NASDQ: BGMD)

This morning, BG Medicine announced the price of an underwritten public offering of its equity securities; declining dramatically as investors fear dilution. Today, we’ll talk about the public offering and its pricing as well as what we’ve seen in the market as a result. So, let’s get right to it…

BG Medicine’s Public Offering & Pricing

BG Medicine’s public offering is a fund raising attempt from which the company will use net proceeds for its US launch of the first automated test for galectin-3. The funds will also be used in support of its automated partners in the development and commercialization of additional automated tests for galectin-3.

While investors seem to understand the need for raising funds, many seem to be upset about the incredible discount offered on the stock through the public offering. BGMD will be offering 2,315,654 series A units as well as 184,346 series B units; both coming at a price of $1.00 per unit. Here is the breakdown of what the units include…

  • Series A Units – Series A units consist of one share of common stock as well as one half of a warrant to purchase one share of common stock at a price of $1.00 per share.
  • Series B Units – Series B units include one fully pr-funded warrant to purchase one share of common stock and one half of a warrant to purchase one share of common stock. Series B units will only be offered in lieu of series A units.

How The Market Is Reacting To The News

Unfortunately, concerns over both dilution and the incredible discount offered through the public offering are driving BGMD down in a big way. Currently (11:50), BGMD is trading at $0.92 per share after a loss of $0.56 or 37.60% so far today.

What We Can Expect To See Moving Forward

While I do understand the reason for the public offering, as with other investors, I am a bit surprised at the nearly 30% discount offered through the offering. Nonetheless, we’ve seen a dramatic drop so far today; bringing BGMD down to support. So, we are likely to start seeing gains tomorrow as the stock tries to recover. How long it may take to get back to the $1.48 it was at per share before the announcement is anyone’s guess.

What Do You Think?

Where do you think BGMD is headed and why? Let us know in the comments below.

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1 COMMENT

  1. That all depends on how long it takes for them to create a revenue stream from ABT on the newly deployed automated test. I was expecting earnings this week to be a positive note, but they have gone from $.80/share, done a 1-4 reverse split, then gone from 2.50/share back down to .90 … maybe they could have done the offering BEFORE the reverse split?

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