Shares of Mesoblast limited (ASX: MSB) were savaged on Monday following a very disappointing float on the NASDAQ exchange in the United States.
Following a two-week suspension from trading, the shares fell more than 38%, sliding from $3.41 to close at just $2.10 with founder and CEO Silviu Itescu reportedly losing nearly $90 million in the process, according to The Australian Financial Review. That compares to a 0.9% fall for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), making it by far the worst performing stock for the day.
Indeed, there are numerous advantages to having a dual-listing in the US, including having access to one of the biggest pool of investors in the world. What's more, the United States has a deep understanding of the biotechnology and healthcare sectors which should be a positive for the group.
However, the float was by no means a success. Where the company had hoped to sell American Depositary Shares (ADSs) for US$12.10 each (where each ADS was equivalent to five Australian shares), they sold for just US$8 which implies a market value of just $2.20 in terms of Australian dollars. The issue represented 12.6% of Mesoblast's issued capital.
Despite the disappointing float, the company still expects gross proceeds of AU$95.8 million. Indeed, companies in the biotech sector are generally capital intensive in nature with the proceeds to go towards ongoing clinical programs, research and development expenses, commercial manufacturing requirements as well as general and administrative purposes.
Even at its beaten-down share price, Mesoblast is by no means a risk-free investment. Biotechs tend to burn through cash very quickly while recognising very little (if any) revenue, so further capital raisings are possible in the future. Still, the heavy fall could be an opportunity for long-term investors to take a closer look at the company and its potential.
