Key points:
- Catalyst Bio (CBIO) stock plunged 70.8% after the special dividend payout.
- Investors were eager to sell their shares after receiving the payout.
- Can CBIO stock be a reasonable speculation? Read on to find out.
The Catalyst Biosciences Inc (NASDAQ: CBIO) stock price plunged 70.8% a day after the company paid its shareholders a special cash dividend of $1.43 per share. The special dividend was announced on August 25, 2022, triggering a rally in CBIO stock.
Today’s crash proves that while one-time events may trigger a rally in a company’s stock price, the gains generated by the event are rarely enough to sustain a future rally. Nevertheless, catalyst Bio tried to maintain investor interest in the company by saying that it could declare another special dividend in future.
Also read: The Best Biotech Penny Stocks Under $5 To Buy Right Now.
WELCOME BONUS - Free Share Bundle When You Invest £50!
Get up to £500 cashback for investing with IG.
Catalyst Bio’s management team should assess the impact of the special dividend, including the brief rally it precipitated. Some critical questions they must ask are, could the $45 million spent on the special dividend payout have been used for other purposes?
What if the company held the amount on its balance sheet, would that have been a better use of the funds? Does it make sense for the biopharmaceutical company to declare another special dividend instead of investing in assets and facilities that could boost its future revenues?
Catalyst Biosciences has a portfolio of drug candidates based around coagulation after selling a portion of its portfolio targeting the complement system for up to $60 million in cash. As a result, the company now has a reduced portfolio of drugs and has to keep advancing its drug candidates to boost its share price.
CBIO stock had fallen by about $1.39, close to the amount paid out as a special dividend of $1.43. It seems that shareholders were eager to sell their shares soon after receiving the special dividend indicating that they may not have faith in the company’s prospects.
So, should you buy CBIO shares? The short answer is probably not. I would wait for the shares to settle after today’s crash before deciding whether to buy. After that, any buy would be speculative in the hope that the shares will rally higher with another special dividend.
*This is not investment advice.
Catalyst Bio (CBIO) stock price.
The Catalyst Biosciences stock price plunged 70.84% to trade at $0.57, falling from Tuesday’s closing price of $1.94.