Ocugen (NASDAQ: OCGN) stock price plunged hard on Wednesday after the company unveiled more plans to dilute shareholders. The penny stock retreated to a low of $0.440, the lowest point since 2020. In all, the shares have plunged by over 99% from the highest level during the pandemic.
Ocugen, a small biotech company that develops and commercializes therapies and vaccines, announced that it will raise capital. It will do that by having a public offering of 30 million shares valued at $16.5 million. It also offered a 30-day option to purchase up to 4.5 million additional shares.
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The company hopes to use these funds for general purposes, capital expenditure, working capital, and general purposes. Historically, investors tend to sell shares when a company announces plans to raise capital by selling shares.
Still, Ocugen’s capital raise was inevitable since the firm has been burning cash. The most recent financial results showed that its cash and short-term investments came in at $76.7 million, down from the previous $90 million. Its net loss came in at $79.8 million. Therefore, since the company is not making any revenue, it was only inevitable for the firm to raise more money soon.
Ocugen faces a major existential challenge since it is building a product that is no longer needed. It is working on a Covid vaccine that was developed by Bharat Biotech. It licensed Covaxin primarily for the American market.
Unfortunately, Covid-19 is no longer a big worry for most people and is no longer seen as a health emergency. Therefore, it is difficult to see the financial viability of this product in the long term.
On a positive side, the company is working on other products for the eye and flu illnesses. It is even pivoting the Covid vaccine to flu, which will always be around. These vaccines will likely require more money, meaning that another dilution cannot be ruled out.
Ocugen share price has been in a spectacular bearish trend after it peaked at $17.74 during the pandemic. It has now plunged to below $0.440. Along the way, the shares have moved below all moving averages signaling that bears are in control. Similarly, the Average Directional Index (ADX) has moved above 20.
Therefore, I suspect that the shares will continue falling in the coming weeks as worries of more dilution remain. This decline could see it move below $0.40. In the near term, a dead cat bounce cannot be ruled out as some traders attempt to buy the dip.
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