Prospects look bleak for Calithera Biosciences (NASDAQ: CALA), as the stock sunk 32.5% in the after-hours of yesterday’s trade session. The market was quick to react following an announcement to commence an underwritten public offering, along with share purchase warrants. CALA’s bearish trajectory is likely to continue further, until it stabilizes as new information surfaces, and its prospects are clarified. This turn around in CALA’s trajectory comes following a persistent two week bull until Monday, pushing the stock up 46.5%. It is evident that the market is repricing CALA, in light of new information, deeming it as previously being overvalued.
Purchase Warrant Issuance for CALA and Underwriting for Public Offering
The news early this morning, pertaining to a public offering is presumably the likely catalyst that had triggered CALA’s plunge. Investors seeing a potential dilution of their holding evidently spread a frenzy n the market, pushing a widespread selling spree. Far more concerning than the prospects of a share dilution was the final price in underwriting. Whilst hovering close to the $0.65 range, the offer made to the public for each share in CALA was $0.54. This clear undervaluation spread panic amongst holders, and clearly indicated a significant overvaluation, which was swiftly corrected by market participants.
However, the degree to which this freefall dive is li kely to persist remains unclear as of yet. The purchase warrants with a lock in at $0.54 act as sweetener for investors, as an incentive to hold with future growth. The stock is likely to bounce-back following the dying down of the initial panic that had engulfed CALA holders. This is evident by the slight climb of 6.3% following the hard dip 0to its all-time low of $0.40. This brief low followed by a swift reversal indicates that the CALA fall has a floor limit, and may see stabilization, and potential growth yet to come.
Upcoming Calithera Earnings Release
On Thursday, Calithera has scheduled to release its earnings report, which will certainly impact the current stock trajectory. The liquidity boost of $10 million of its recent offering will presumably cushion negative results. Moreover, announcements pertaining to its potential pipeline may raise optimism, but the uncertainties and risk inherent to the pharmaceutical industry would remain a factor in stock pricing.
CARA underwent a hard plummet following announcement of a public offering, significantly priced below at its then current market price. In addition to this heavy overvaluation, traders also face the cost of share dilution. This hard fall is likely to stablilize with tommorow’s earnings release.