Just wasted a minute of my life reading this scare tactic from SA
Summary
Anavex is likely to raise capital soon.
The terms will likely be ugly.
After a pop the last few days, investors have a chance to exit here.
By Parke Shall
The price of Anavex (NASDAQ:AVXL) stock has risen over the last few trading sessions as the company is feeling some momentum for the first time in a couple of weeks.
AVXL Chart
AVXL data by YCharts
Recently, the company survived an SEC investigation into its trading and, despite posting clinical data that was not received well by the market days prior, the stock has still found a bid over the last week and is trading back near $4 per share.
Upon release of clinical data for its Anavex 2-73 in Alzheimer's patients weeks prior, the stock had traded as low as almost $2.25. Those that bought in the days after this clinical data was released have surely seen a good return on their investment thus far, but we think now may be the time to exit AVXL once more and we wanted to lay out our simple reasoning in this article.
AVXL has been boosted over the last few days from a series of press releases that the company has issued.
The company has issued three press releases over the last 14 days, none of which seem to contain materially significant information with regard to the potential long-term success of the company's drug or the company's immediate financial situation, which needs to be addressed.
As of its last quarterly filing, the company has a little over $9M in cash in the bank and burned about $4.4M in cash last quarter. This leaves little time for the company to raise more cash.
AVXL Cash and Equivalents (Quarterly) Chart
AVXL Cash and Equivalents (Quarterly) data by YCharts
Now that the company has gotten the "all clear" from the SEC, we expect the company to go out and raise capital. We think that given the stock's recent move upward, investors should look at this situation as an opportunity to sell their shares prior to the terms of the company's coming capital raise being announced.
The capital raise is likely going to come in the form of a stock sale, as we don't think the company can take on meaningful amounts of debt at fair terms right now. We do expect the company to perform a dilutive equity offering, where a steep discount and warrants will be offered to those participating in the financing.
When this occurs, we expect the price of the stock to correct and move lower towards the offering price. Simply put, even if AVXL investors are in the company for the long run, which we don't recommend, there is still likely going to be an opportunity to buy shares at a much lower price after an offering price is established and the dilutive facts of a financing are recognized by the market.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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