Relay Therapeutics, a biotech firm focused on oncology treatments, experienced a challenging Wednesday on the stock market, with shares tumbling by 13.83%. This downturn was triggered by recent announcements regarding an impending secondary share offering, which investors largely view as excessively dilutive. Consequently, Relay’s stock ended the day nearly 14% lower, a stark contrast to the S&P 500’s gain of over 1% that day.
A $200 Million Initiative
On Monday, Relay declared its intention to generate $200 million in gross proceeds through a new common stock offering. The following day, after trading hours, it revealed further specifics, stating that the offering would consist of nearly 28.6 million shares, priced at $7 each—a significant drop from recent highs.
The offering is being managed by underwriters including Goldman Sachs, TD Cowen, Stifel, and Bank of America Securities. They have a 30-day option to collectively buy around 4.3 million additional shares.
Relay anticipates net proceeds of approximately $189.5 million from this issuance, though it hasn’t detailed the intended use of the funds. The offering is expected to conclude on Thursday, September 12.
Facing Dilution Concerns
Before this issuance, Relay had close to 134 million shares outstanding, according to Yahoo! Finance data. This means the new issuance will dilute existing shareholders by at least 21%, a significant percentage even within the often cash-challenged biotech industry. It’s understandable why investors responded negatively to the news.
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