Celsion Corporation (NASDAQ: CLSN) is running for the top in the market this morning, climbing more than 80% in the premarket hours. The gains come after the company announced the termination of a share purchase agreement. Here’s what’s going on:
Skip to What You Want to Read
- Celsion Announces the Termination of a Share Purchase Agreement
- Why Investors Are Excited
- What Analysts Think About CLSN Stock
- Risks to Consider Before Buying CLSN Stock
- Final Thoughts
Celsion Announces the Termination of a Share Purchase Agreement
Recently, news broke that Celsion terminated its share purchase agreement with Lincoln Park Capital.
According to the original stock purchase agreement, Lincoln Park Capital was planning on purchasing $26 million in shares over the course of three years. $2.2 million worth of shares was sold to Lincoln Park Capital before the termination of the agreement.
Why Investors Are Excited
This is overwhelmingly positive news from the investors’ standpoint. After all, the shares being sold to Lincoln Park Capital were newly-issued. That means that every time Lincoln Park purchased a share, dilution was the result.
Think about it as if the company was a birthday cake. Every time someone new shows up to the party, the piece of cake received by all participants will be a bit smaller. That’s exactly what would have happened through this share purchase agreement. For every share of CLSN stock sold to Lincoln Park Capital, existing shareholders would have to accept a smaller piece of the pie.
So, when the announcement broke that the company would terminate its share purchase agreement, investors became excited, knowing that they would maintain the value in their shares of the company.
At the same time, CLSN stock traded with heavy short interest. So, when the news broke and the stock started ticking up, shorts started to lose their shirts, leading them to race to cover in what has clearly become a short squeeze.
What Analysts Think About CLSN Stock
It’s never a good idea to blindly follow the opinions of any expert when it comes to investing. Doing your own research will serve you well. Nonetheless, I like looking at analyst opinions as a potential source of validation for my own.
When it comes to CLSN stock, there is only one analyst that’s weighing in. The analyst rates the stock a Hold. However, with today’s news that the company will not be continuing forward with the stock purchase agreement, it may be time for an upgrade.
Risks to Consider Before Buying CLSN Stock
When you invest, risk will be present. That’s true with CLSN stock and any other stock. In the case of CLSN, the most significant risks to consider include:
- Clinical & Regulatory Risk. Celsion is a clinical-stage biotechnology company. As a result, the company’s performance is largely dependent on its performance in the clinic and how regulatory authorities view its work. If the company fails in any clinical trial, or regulatory authorities find holes in the data, we could see significant declines.
- Money. Today’s rally is all about the termination of a dilutive deal. However, CLSN isn’t driving revenue as a clinical-stage biotech company. As such, if funds run dry, further dilution could be in the future, leading to declines.
- Speculation. As a clinical-stage biotech company, CLSN stock is an investment riddled with speculation. Speculative bets are often risky and could lead to significant losses.
While there are risks to consider, CLSN stock looks like a great investment opportunity at the moment. With the termination of the share purchase agreement, dilution is not hanging over the stock. Moreover, the company’s work in the oncology space is difficult to ignore, with several catalysts likely ahead. All in all, this stock is one to watch closely.