What happened
Shares of Mainz Biomed (MYNZ 0.11%) had crashed by 26.4% as of 11:38 a.m. ET on Wednesday. The big decline came after the molecular genetics diagnostic company announced the pricing of a public follow-on stock offering. Mainz plans to sell 1.5 million shares at $15 per share.
So what
It's not surprising at all that Mainz Biomed's share price dropped so much in response to the news. The price that management set for this new stock offering was roughly 26% below the closing price for the life sciences stock on Tuesday.
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The dilution resulting from such secondary stock offerings nearly always causes share prices to sink. However, there's also some good news here for Mainz. The company should rake in gross proceeds of $22.5 million.
Mainz revealed in a regulatory filing to the Securities and Exchange Commission last week that it plans to use proceeds from the offering for several purposes. One key use will be to conduct a clinical study in Europe.
The company also intends to use some of the money to complete the necessary clinical and regulatory steps to earn U.S. authorization for its ColoAlert colorectal cancer screening test. In addition, Mainz hopes to expand its commercial team and partnerships for ColoAlert in Europe, and to advance the research and development of two of its other products -- pancreatic cancer screening test PancAlert and molecular lateral-flow test GenoStrip.
Now what
Mainz expects the follow-on offering to close on Friday. The main things that investors will want to keep an eye on will be the company's progress at marketing ColoAlert in Europe and securing authorization to sell it in the U.S.