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Here’s why Admedus Ltd shares have crashed today

Shares of junior biotechnology company, Admedus Ltd (ASX: AHZ), slid 16% lower before midday today after it announced the details of its most recent capital raising.

After entering a trading halt earlier this week, pending the announcement of a capital raising, shares have taken a dive because new stock will be issued at just 7 cents per share – a 28% discount to its previous closing price.

Last week, Admedus’ management made an ASX announcement saying its flagship product, CardioCel, is expanding into Hong Kong.

After moving through clinical trials and receiving necessary regulatory approvals, Admedus has begun marketing CardioCel to surgeons throughout the world. It is simultaneously undertaking a vaccine development program.

The offer

Admedus today said it had conducted a heavily oversubscribed $12 million institutional capital raising at 7 cents per share.

Retail shareholders have the opportunity to participate in the capital raising, also at 7 cents per share, through a 1 for 7 non-renounceable pro-rata rights issue. The retail offer will raise $16 million if it’s fully subscribed.

Admedus CEO, Lee Rodne said, “This capital raising places the Company in a strong financial position, and allows us to continue to build our sales teams and ongoing sales activities across the group as well as make significant progress in our regenerative tissue product development and immunotherapy programs.

Shareholders on the register at 7pm (Perth Time) 26 March 2015 will be entitled to participate in the retail offer.

Should you take part?

CardioCel has been proven to work and there’s a lot to like about Admedus’ other programs. However, so far, the company has been long on promise and short on delivery. I recently sold my shares but will be watching it closely over coming years to see how it progresses with its vaccines program and marketing CardioCel. If I still owned shares, I’d probably just accept my holding would be diluted and wouldn’t participate in the offer because I believe money could be better invested elsewhere.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the companies mentioned in this article. Owen welcomes your feedback on Google plus (see below) or you can follow him on Twitter @ASXinvest.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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