Everyone Knows a Secondary Offering is Coming in GlobeImmune (GBIM)

Steve Kanaval  |

MicroCap stocks work this way...the stock gets a meteoric ride doubling in value and the bankers show up and work out a deal with the company to sell shares below current prices to raise operating capital. It happens every day, and it is happening in Globelimmune (GBIX) today as shares are lower by 25% after a huge move last week. See the share price below and how pricing moved last week from $1.30 to $3.50 and back down to $2.50 today. The company has not announced that this is in fact what is happening, but usually the market tells us before hand.

My guess is that we are near the price which the secondary offering will take place somewhere between $2 and $2.25, which will cause immediate selling of shares so the investors can offload some of the risk associated.

Secondary offerings are commonplace in the industry. They are defined by Wikipedia as follows:

" A secondary market offering, according to the U.S. Financial Industry Regulatory Authority (FINRA), is a registered offering of a large block of a security that has been previously issued to the public. The blocks being offered may have been held by large investors or institutions, and proceeds of the sale go to those holders, not the issuing company. Also called secondary distribution.

A secondary offering is not dilutive to existing shareholders since no new shares are created. The proceeds from the sale of the securities do not benefit the issuing company in any way. The offered shares are privately held by shareholders of the issuing company which may be directors or other insiders (such as venture capitalists) who may be looking to diversify their holdings. Usually however, the increase in available shares allows more institutions to take non-trivial positions in the issuing company which may benefit the trading liquidity of the issuing company's shares.

A secondary market offering should not be confused with a follow-on offering, otherwise known as a subsequent offering, or a dilutive secondary offering. In a follow-on offering, the company itself places new shares onto the market, thus diluting the existing shares. "

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