ReShape Lifesciences Inc (NASDAQ: RSLS) is continuing upward in its recovery from a recently announced public offering of common stock that brought the value of shares down by more than 70%. While the company has announced the termination of the offering, and has headed for the top for a few sessions as a result, I urge you to consider the idea that these gains will not last. Today, we’ll talk about:
- Why RSLS is headed up;
- why it will fall back down;
- what we’re seeing from the stock today; and
- what we’ll be watching for ahead.
Why RSLS Is Headed Up
Recently, ReShape Lifesciences announced that it would be moving forward with a public offering of more than 12 million shares. Of course, an offering of this magnitude came with some serious dilution, leading to dramatic declines in the stock on the day of the announcement.
Nonetheless, the company quickly walked back the public offering, announcing that it had terminated the agreement. Of course, when the offering was terminated, so too was the treat of dilution. At least for the moment. So, as the dilution threat subsided, investors started to push RSLS back upward.
Be Prepared For More Declines
While the company announced the termination of the agreement surrounding the public offering, that doesn’t mean that RSLS is out of the woods. Unfortunately, the company is still dealing with some serious financial headaches, which is why it was moving forward with the offering in the first place. With the offering now off of the table, the company is going to need to find another way to bring in the funding it needs in order to continue forward with operations. So, although the threat of the offering is off the table at the moment, the threat of dilution through a different funding vehicle is very real.
What We’re Seeing From The Stock
As mentioned above, ReShape Lifesciences is continuing upward in the market as it has been since the announcement that the agreement surrounding the offering had been terminated. Of course, our partners at Trade Ideas were the first to alert us to the gains. Currently (9:18), RSLS is trading at $0.16 per share after a gain of $0.024 per share or 18.23% 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 RSLS. In particular, we’re interested in seeing how the company goes about funding now that the public offering is off of the table and just how dilutive the coming transaction might be. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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