Why did the Opthea share price dive 9% on Monday?

The Opthea Limited (ASX: OPT) share price closed 9.35% lower on Monday after the company announced details of a new share issue.

Shares of the biopharmaceutical company finished the day at $1.26 each after opening at $1.39 this morning. They hit a low of $1.17 a share, a drop of almost 16%, just after midday.

Let’s take a closer look into the details of the financial arrangements that concerned investors today.

Opthea closes $128.57 million financing deal

The company announced it has raised $128.57 million (US$90 million) after issuing new fully paid ordinary shares to institutional investors.

Opthea announced two tranche placements for a total of 111.8 million new shares as part of a non-dilutive financing deal with global investment firm Carlyle and Abingworth, worth up to $239.43 million.

Shares were issued in collaboration with Carlyle and Abingworth’s development company Launch Therapeutics, a firm that helps biotech and biopharma companies with funding and development capital.

The new shares were issued for $1.15 a share, or a 12.6% discount to the 10-day volume-weighted average price of 10 August.

Tranche one of 52.8 million new shares is expected to settle on or about 24 August. Once Opthea receives funds from this first round of tranches, it will pay Carlyle and Abingworth $70 million.

The second tranche of 59 million shares will be issued after a general shareholder meeting scheduled for 26 September.

What did management say?

Opthea Managing Director and CEO Megan Baldwin said:

This well-supported placement has seen a high level of demand from existing and new institutional investors, including large global and US-based funds. These financings further validate our strategy to develop OPT-302 as a differentiated therapeutic with the potential to improve patient outcomes in retinal diseases including wet age-related macular degeneration.

The company says the funds raised will be used to progress phase three clinical trials of OPT 302, a fusion protein. They will also provide the company with additional working capital to undertake its research.

Opthea’s share repurchase plan for existing shareholders

Existing Opthea shareholders with a registered address in either Australia or New Zealand as at 12 August can also apply for up to $30,000 worth of new shares under the company’s share purchase plan (SPP). Shares will be sold at the placement price of $1.15 per share.

Full details will be released in the SPP offer booklet that will be available through the ASX.

Opthea share price snapshot

The Opthea share price is down 2.7% year to date although it’s gained more than 10% in a month.

By comparison, the S&P/ASX 200 Health Care Index (ASX: XHJ) is down almost 5% so far in 2022.

The company has a current market capitalisation of around $444 million.

The post Why did the Opthea share price dive 9% on Monday? appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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