Why is the Mesoblast share price sinking 25% on Tuesday?

This biotech is being sold off today. But why?

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The Mesoblast Ltd (ASX: MSB) share price has returned from its trading halt with a bang.

In morning trade, the biotechnology company's shares are down a massive 25% to a decade-low of 30.5 cents.

Why is the Mesoblast share price sinking?

Investors have been hitting the sell button today after Mesoblast completed yet another capital raising.

With the company struggling to get its stem cell therapies approved by the US Food and Drug Administration it has continued to burn through cash like kindling in recent years.

Unfortunately, this has meant it has needed to tap the market multiple times to keep the lights on at Mesoblast HQ.

On this occasion, the company has received firm commitments for an institutional placement and entitlement offer to raise $55 million at a 26% discount of $0.30 per new share.

Despite how poorly previous capital raisings have turned out for investors, Mesoblast notes that the placement was oversubscribed. The company's CEO, Dr Silviu Itescu, has also committed to taking up a majority of his entitlement.

Dr Itescu commented:

I would like to acknowledge the ongoing support from our key institutional shareholders who have participated alongside myself and welcome new investors in the accelerated component of our placement and entitlement offer. The funds raised will allow Mesoblast to achieve its key objectives for 2024, as outlined at the AGM.

The company will now push on with its retail entitlement offer which is aiming to raise $42 million at the same price. However, given that the offer price is now only a modest discount to where its shares trade, it remains to be seen how popular it will be.

The Mesoblast share price is now down approximately 75% over the last 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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