OncoSec Medical Inc (OTCMKTS:ONCS) Drops As Fear Of Dilution Sets In
As you can see from the chart on the right, OncoSec Medical Inc (OTCMKTS:ONCS) has been a wild ride for the last couple of months. Green rallies followed by sudden and violent corrections have been on the menu and it seems that the ticker is simply unable to put on any sort of stable performance.
During the first two weeks of September, things were particularly interesting because of the increased trading volumes. The ninth month of the year started strong for ONCS as the ticker broke free from the $0.29 – $0.30 range and reached $0.35. On September 12, however, just a couple of days after the ascend, it was pretty much back where it started. During last Friday’s sessions it was showing signs of recovery and most of the traders were expecting the new week to begin on a positive note. Something went wrong.
A few hours before yesterday’s opening bell, a press release announced some definitive agreements with unnamed institutional investors for the purchase of around $12 million worth of ONCS common stock. 47 million shares will be sold at $0.25 per share and some warrants exercisable at $0.35 will be issued as well. The deal should be done and dusted by Thursday and it’s pretty clear that the traders are not impressed.
The ticker opened yesterday’s session at $0.28 (a whopping $0.04 below its previous close) and immediately entered a free fall mode. By the end of the day it was standing at just $0.257 which represents daily losses of around 19.4%. That is the biggest single-day drop for ONCS in quite a while and the record-breaking 17 million shares that changed hands yesterday pushed the dollar volume to a mind-boggling $4.6 million.
So, what is to be learned? Well, it’s pretty clear that some of the shareholders are somewhat reluctant to accept the prospects of a massive number of shares crushing down their investments further, especially now when the commercialization process is still in the distant future. They are probably not particularly happy with the fact that ONCS seem to be keeping quiet about who it is that is putting money in the ticker as well and the ones that have been in for a longer period of time probably remember that the previous two placements (the ones in March 2011 and June 2011) did little to boost shareholder value.
Silver linings? Well, as ONCS themselves are eager to explain, the proceeds from the sale of equity will be used to fund the clinical trials, pay salaries and generally sustain the operations. We’ve covered the company a fair few times and we’ve always said that their balance sheet looks a lot more solid than that of other biopharma penny stocks, but even so, the task that ONCS have set themselves will require quite a lot of money and if the $12 million can speed up the process a bit, the shareholders will be even happier.
Another plus point of yesterday’s offering is the price. Unlike other small cap ventures (Sigma Labs Inc (OTCMKTS:SGLB) is a prime example )whose placements involve some massively discounted stock, ONCS kept the price relatively close to the market value. In fact, after yesterday’s drop, the chance for some quick and easy money for the mysterious institutional investors remains quite slim which should serve as something of a relief for the people who still have their money in ONCS.
On the whole, it’s pretty clear that the offering announced yesterday has its upsides and its downsides. Apparently, the traders focused on the disadvantages and we can understand why. Some of them have invested quite a lot of money when the price was hovering way above the $1 per share mark. So far, they have managed to register virtually no return and with the commercialization process still nowhere in sight, the chances of some consistent growth seem rather small at this point. This makes the behavior of the stock extremely unpredictable which is why weighing the risks carefully is absolutely crucial.
