Ocugen Inc (NASDAQ: OCGN) is screaming for the top in the market this morning, and for good reason. The company announced that it’s raising funds. However, unlike many fundraise efforts seen in the biotechnology category, this raise is happening at a premium to the market price as of the announcement of the transaction. Here’s what’s happening:
Skip to What You Want to Read
- Ocugen Raises Funds at a Premium
- Why This Is Exciting News
- What Analysts Think About OCGN Stock
- Risks to Consider Before Buying OCGN Stock
- Final Thoughts
Ocugen Raises Funds at a Premium
As mentioned above, Ocugen is having a strong start to the trading session after announcing that it would be raising funds. However, this fundraise is different from what we generally see among clinical stage biotech stocks.
Instead of raising funds at a discount to the current market price, OCGN is raising funds at a premium, with the investors willing to pay more than market value to jump in.
In fact, the company has entered into definitive agreements with healthcare-focused institutional investors surrounding the sale of 3 million shares of common stock at a price of $7.65 per share.
Considering the fact that the most recent close took place at just $5.25 per share, the deal is coming with an incredible premium, which is obviously exciting investors.
In the release, OCGN said that the offering is expected to close on or about February 10, 2021, yet the closing is subject to customary closing conditions.
The company went on to say that gross proceeds are expected to be about $23 million before deducting agent fees and other expenses associated with the offering. Once these fees are deducted, Ocuge says it plans on using the net proceeds for general corporate purposes, capital expenditures, working capital, and general and administrative expenses.
Why This Is Exciting News
This is very big news for a couple of reasons:
- The Premium. The premium provided in the offering is incredible. While most of the time companies at this stage raise funds, they do so at a discount, leading to declines in the stock price, this raise is happening with a massive premium. That’s great news for the company and its investors.
- Institutional Interest. Institutional investors generally want a discount because they buy so many shares at once. The investors involved in this deal are spending millions of dollars to buy shares at a premium, showing that they see real value in OCGN in the future. A rare transaction like this is sure to excite the investing community.
What Analysts Think About OCGN Stock
At the moment, analysts seem to love Ocugen Stock. In fact, there are four analysts covering the stock as we speak, all of whom have it rated as a Buy. That’s right, there are no sell or hold ratings on this stock.
While ratings are exciting, the price targets on the stock are somewhat concerning, ranging from $0.70 to $8. Nonetheless, the vast majority of price targets and analyst coverage on the stock is outdated. Considering recent, positive news, I’m expecting that upon re-review, we will see price target increases and reiterations of buy ratings.
Risks to Consider Before Buying OCGN Stock
If you’re thinking about buying OCGN stock, or any stock for that matter, you’re going to have to be willing to accept risk. After all, investing always comes with the potential to lose your money. In the case of OCGN stock, the most significant risks to consider include:
- Clinical Risks. Ocugen is a clinical-stage biotechnology company. This means that it doesn’t yet have any treatments on the market. Should something go wrong in the clinic, and a trial fail, the stock could experience significant declines.
- Regulatory Risks. Once clinical trials are complete, OCGN will have to seek regulatory approval before being able to sell its therapeutic options. Even if the data seems positive, regulatory authorities may find issues with the data, making the decision to reject the treatment and leading to declines in the value of the stock.
- Capital Risk. While this one is covered for right now, who knows what the future will hold. OCGN isn’t a revenue-generating company as it must receive regulatory approval to sell its products. As such, if the money it has in the bank, plus the $20+ million being added through this offering aren’t enough for the company to reach profitability, another offering may come down the line. Since premiums are rare in offerings like this, they tend to lead to significant declines.
Sure, there are risks to consider before investing in Ocugen stock. However, there are risks to consider before investing in any stock, or any asset, for that matter.
The fact of the matter is that OCGN is doing great things with its science, and big money players are seeing tremendous value. If that wasn’t the case, a group of healthcare focused institutional investors would have never agreed to pay a premium to buy shares.
All in all, OCGN stock is one for the books.