Precision medicine company stocks Guardant Health (Nasdaq:GH)Specializing in liquid biopsy Cancer ScreeningIt was down 10.6% by 10:05 a.m. ET on Monday.
Monday was the first trading day as investors reacted to Guardant’s announcement late Friday of plans to sell shares and raise $400 million. New Cash To raise operating funds.
Parents need money
Guardant’s announcement came in the form of an 8-K filing with the Securities and Exchange Commission (SEC). “Guardant may, from time to time, in its sole discretion,May The company will offer and sell new shares at market price worth up to $400 million (emphasis added).
Guardant’s current market cap is $3.2 billion, so this means the company will increase its share count by about 12.5%, diluting existing shareholders by the same 12.5%. And Guardant won’t be able to keep the full $400 million. 3% of the cash raised will go to investment banks. JefferiesWe are planning to sell our shares.
Why does Guardant need cash?
Investors are rightly wary of potential dilution, but that’s not surprising: Though Guardant has grown rapidly (annual sales have roughly tripled to $644 million over the past five years), it’s not yet profitable and it continues to burn through cash.
That’s a lot of cash.
Its total cash for the past 12 months is approaching $300 million, a slight decrease from last year but still not positive. Most analysts believe Guardant is Become It won’t be free cash flow positive for a few more years, until 2028 to be exact.
That day is still a long way off, as analysts believe Guardant would need to roughly double its annual revenue to reach that level, and investors should expect further share sales and fundraising until the company is large enough to generate the cash it needs on its own.
This will result in additional dilution.
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Rich Smith The Motley Fool has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Guardant Health and Jefferies Financial Group. The Motley Fool has no position in any of the stocks mentioned. Disclosure Policy.
Why Guardant Health shares plummeted 10% Originally published on The Motley Fool
