Why Did The Mesoblast Share Price (ASX:MSB) Drop 10%?

The Mesoblast Limited (ASX: MSB) share price was crunched by as much as 10% this morning after the company successfully completed a $75 million capital raising.

About Mesoblast

Mesoblast is a world leader in the development of allogeneic (off-the-shelf) cellular medicines. The company has leveraged its proprietary cell therapy technology platform to establish a broad portfolio of commercial products and late-stage product candidates. Mesoblast has facilities in Melbourne, New York, Singapore and Texas and is listed on both the ASX and the Nasdaq in the U.S (NASDAQ: MESO).

What’s Happened?

In an ASX announcement this morning, Mesoblast said it had successfully completed an institutional share placement, raising $75 million in the process.

The placement will result in the issuance of an additional 37.5 million shares at a price of $2.00 per share, which represents a 7% discount to the last closing price.

As expected, the Mesoblast share price fell at the open this morning, moving closer to the issue price of $2. The share price briefly fell to a low of $1.92 earlier today, before recovering somewhat to be trading at $2.00 at the time of writing.

The proceeds of Mesoblast’s capital raising will predominantly be used to build product inventory, as well as a US sales force in preparation for the potential launch of remestemcel-L, a treatment relating to aGVHD (acute graft versus host disease). Proceeds will also be used to complete Phase 3 trials for chronic low back pain and advanced heart failure.

Management Commentary

Commenting on the institutional capital raising, CEO Dr Silviu Itescu said: “We are very pleased with the significant broadening of our institutional register and the strong continued support from our existing shareholders, with demand exceeding the funds raised. Mesoblast is well funded to execute the commercial strategy for potential launch of its first allogeneic cell therapy in the United States.”

What Now?

Mesoblast’s share price went nuts last month after announcing a strategic partnership with a German pharmaceutical business. The company appears to have promising potential but while it’s easy to get swept up by a great story, it’s important that we, as investors, take a commonsense approach when investing in small growth companies.

Despite its obvious potential, Mesoblast is not yet profitable and there is no clear indication that it will be in the near future. As a result, I think its current market capitalisation of just under $1 billion is a bit of a stretch.

My preference would be to find companies with proven products that have already crossed the line of profitability, and with an ability to scale quickly. This might mean that you miss the initial share price appreciation, but it may also strip out a lot of the execution risk.

Disclosure: At the time of writing, the author of this article has no financial interest in any of the companies mentioned.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just enter your email address below and we'll send you the report right away.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Keep reading:

General Financial Advice warning
The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

© Rask Australia 2020

Join 20,000+ smart investors

Join the Rask Australia mailing and we’ll send you free investment reports, podcasts, expert insights, investing courses, ASX news and lots, lots more. All free. 

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian-owned.

feedback-icon

What can we do better? Please give us us some feedback :)

We care about your experience, please let us know if you have any suggestions to improve our site.