|RXII and CYTR: What to make of today's financing|
|By Jude Santos|
|Tuesday, 23 March 2010 15:40|
For months, we have been hearing that a partnership with a big pharma was in the works for RXII. In the last few days, the chatter and the stock price had increased significantly. According to some, the partnership talks were already close to becoming a reality, but then a surprise announcement after shares were halted on Tuesday afternoon.
RXII announced that it is selling about a $16.2 million mix of stock and warrants after obtaining commitments from several investors to purchase 2.7 million shares of common stock at $6 per share and warrants to purchase 540,000 shares of stock.
Trading was halted and then shares of RXi fell $2.15, or 27 percent, to close at $5.96.
According to some, the company may have felt tht the potential partnership talks stalled a bit because RXII and it's parent company CYTR suddenly felt that they were negotiating from a position of weakness due to a lack of operating capital. That problem has apparently now been addressed since company officials say proceeds from the offering will be used for working capital, general purposes, and to buy back about 675,000 shares of RXi stock from CytRx at a price of $5.70 per share. Rodman & Renshaw, which reportedly had a deal in place to raise money for CYTR once its own shares hit $2 acted as the exclusive placement agent for the for the stock offering. It appears that former biotech banker, and current CytRx CEO, Steve Kreigsman may have worked some magic to not only help CYTR get some money, but also helped give RXII a stronger balance sheet for their negotiation talks with partner(s).
The good news for CYTR shareholders is that now they get $3.8M cash and still own 28% of RXII all without additional dilution of RXII shares.
Prices should rise for both companies in the short term once the volatility ends and on-going negotiations continue on a stronger footing. Keep an eye on the call-put action on these stocks over the next couple of days. That will give even more guidance.
Disclosure: No Positions