The Paradigm Biopharmaceuticals Ltd (ASX: PAR) share price is plummeting after coming out of a trading halt this morning.
At the time of writing, the biopharmaceutical company's shares are fetching at $1.45, down 26.95%.
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What's driving the Paradigm share price lower?
Investors are scrambling to offload Paradigm shares amid an impending share dilution from the company.
According to its announcement, Paradigm advised it has launched a fully underwritten $66 million capital raise.
This comprises of a $45.7 million institutional placement to domestic and offshore investors and a one for 15 pro-rata non-renounceable entitlement offer of $20.3 million at $1.30 per share.
The company noted the placement received strong participation from domestic and offshore institutional investors. This will result in the issue of approximately 35.1 million Paradigm shares.
The record date for the entitlement offer is on Thursday 18 August 2022.
Eligible shareholders subscribing for their entitlement can also apply for additional shares under a top-up facility. However, this will be capped at 100% of an eligible shareholder's entitlement.
The entitlement offer will result in the issue of approximately 15.6 million shares.
Following completion of the capital raise, the company will have a proforma cash position of $108.5 million. This will provide sufficient cash flow to see through its operations into the 2024 calendar year.
What will the funds be used for?
The monies raised from the capital raise will be used to fund a number of initiatives that include the following:
- Paradigm's phase 3 clinical program and new drug application (NDA)-related activities;
- Business development-related activities;
- Product development-related activities (such as auto-injector); and
- Working capital.
Paradigm chair Paul Rennie commented:
I would like to thank all institutional Investors who participated in the placement, and I am delighted that all Paradigm shareholders now have the right to also invest under the fully under-written non-renounceable entitlement offer.
Personally, I will be subscribing for $300,000 of new Paradigm stock under the entitlement offer. Having a strong balance sheet is important to Paradigm so we can maintain or accelerate the momentum of our Phase 3 clinical trial. A strong balance sheet is important as we have commercial discussions in the future.
Paradigm share price review
It has been an interesting year for Paradigm shares, treading lower for most of 2022 until recently shooting higher.
The company's share price reached a year-to-date high of $2.17 on 9 August before going into a trading halt the following day.
Based on today's price, Paradigm has a market capitalisation of roughly $332 million, with more than 228 million shares outstanding.
