Why Iovance Biotherapeutics Stock Got Mashed on Monday

Key Points

• The biotech is floating an at-the-market, secondary stock issue.

• It will use the funds to advance its top commercialized drug and further develop its investigational programs.

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Monday won't go down as a particularly memorable trading session on the stock market. It also won't be marked as a great day for shareholders of biotech Iovance Biotherapeutics (NASDAQ: IOVA). The company spooked investors with the disclosure that it's embarking on a new round of potentially dilutive capital raising.

That sent the company's share price down by nearly 6% today, quite some distance down the ladder from the S&P 500 index's 0.4% decline.

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A $350 million piece of news

Iovance, a commercial-stage biotech that focuses on novel treatments for cancer, divulged the measure in two regulatory filings published after market hours Friday. The filings detailed plans to raise up to $350 million in an at-the-market, secondary issue of its common stock.

Image source: Getty Images.

Iovance has drafted financial services company Jefferies to be its sales agency in the flotation. In return for this work, Jefferies will earn a commission of 3% of the total gross proceeds of the issue.

The biotech is keeping the timing loose; in boilerplate language, it stated that the share sales would be effected by Jefferies "from time to time, based upon instructions from the Company."

In the prospectus on the issue, Iovance said it will use the proceeds to boost the commercial prospects of its leading drug, Amtagvi. It will also devote funds to its investigational programs, as well as undefined "general corporate purposes."

A reason to be concerned

Dilution is a legitimate concern in this case, even if Iovance ultimately ends up selling half as many shares as the maximum amount stated. Just now its market cap is over $915 million, so this flotation could be significantly dilutive indeed.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Iovance Biotherapeutics and Jefferies Financial Group. The Motley Fool has a disclosure policy.