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Delcath Systems Implodes on Stock Offering

In what could only be described as a fitting end to a week after the Facebook (NASDAQ: FB) IPO debacle, shares of Delcath Systems (NASDAQ: DCTH) tumbled in reaction to the company’s stock offering announcement made after the close on May 24, 2012. Not only did the stock manage a 37 percent decline, but it also made a new 52-week low to boot. Delcath Systems stock gapped down $0.89 on the morning bell to open at $1.48 on May 25.

A gap occurs when the opening price, in this case, is lower than the previous day’s low or vice-versa for stocks opening higher. The rest of that trading session saw shares seesaw in a 12-cent range and touched a new annual low of $1.46. The stock ended the week at $1.50, with an overwhelming amount of trading volume. Over 13 million shares traded on Friday, compared to an average daily volume of 288,000. It has been more than two years since the stock last traded that amount of volume in a single day.

Delcath Systems is a specialty pharmaceutical and device company that focuses primarily on the treatment of liver cancers. After the close on Thursday the company announced a secondary offering of 13.3 million shares of common stock plus warrants. The warrants can be exercised at a price of $1.65 per share and expire three years from the date of issuance. The combined pricing for the stock and warrants equated to $1.50 per share, or 87 cents below Thursday’s closing price of $2.37. Proceeds from the $20 million offering will go toward general purposes and toward funding clinical trials and providing working capital. Delcath Systems had also secured a $20 million line of credit from Silicon Valley Bank in the third week of April.

Delcath Systems reported first quarter earnings three weeks ago on May 8. The company reported a loss of 31 cents, slightly worse than the 27-cent loss that analysts had estimated. For the year, analysts expect Delcath Systems to show a loss of $1.08. The stock declined a dime the following morning.

Outside of financial reports, recent news on the company has primarily dealt with treatment results and regulatory approval.

  • On April 5, Delcath Systems received European approval for its new Chemosat treatment system.
  • On April 13, the company started its first patient treatment using the Chemosat system.
  • On April 26, Delcath Systems revealed low side affects with the Chemosat system.

Despite what appeared to be positive news, the stock continued to slump as investors took a wait-and-see attitude.

The annual high for the stock was set nearly 10 months ago when shares traded at $6.44. During the course of the last year, the stock of Delcath Systems has mainly trended lower and hit $2 in December 2011 before rallying in the spring.

Today’s trading has so far proved disappointing, as the stock remains trading up only 0.7 percent. The future of the stock is unclear, but perhaps buying now could reap high benefits if the company’s positive results from its Chemosat system end up affecting the stock price in the near future.

Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email ([email protected]) or his Google+ page (https://plus.google.com/103338576216002376250).

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