what happened
Very different from diving S&P 500 index, heart medicine (MNMD 6.17%) Stocks rose on Thursday. Shares of the psychedelic developer reversed course from Wednesday, up more than 6%, as major investors rallied strongly against a planned large-scale secondary equity issue.
So what
The investor is a company called FCM MM Holdings, which owns just over 6% of MindMed’s outstanding common stock. In a letter to MindMed’s board of directors on Wednesday, FCM formally asked the company to cancel its plans immediately. Offer of Stock Acquisition Rights.
MindMed plans to issue just over 7.05 million shares. Each comes with a warrant that allows the holder to purchase additional shares. The price for this package is $4.25 each.
In its rather scathing letter, FCM wrote, “MindMed does not present a compelling need for additional equity financing at this time, especially at such a low valuation.”
The disgruntled investor went on to write that MindMed has not disclosed details about how it will use the proceeds in question. The company said a public offering would be a “substantial destruction of shareholder value.”
So
Certain points made by FCM are exaggerated a bit, but the core claims are true. This issuance is highly dilutive as MindMed’s total shares outstanding could increase by nearly 50% if all warrants are exercised.
As Mindmed biotech Working in exciting new therapeutic areas based on psychedelic compounds, the company is a company to watch. But given this sudden and very nasty shareholder dispute, it may not be the ideal business to invest in – at least not for now.
Eric Volkmann I do not have any positions in any of the stocks mentioned. The Motley Fool has no positions in any of the companies mentioned. The Motley Fool Disclosure policy.
