Quotient Drops 30% On Stock Offering – What Comes Next?

Quotient (NASDAQ: QTNT) stock has dropped 30% premarket as the company took advantage of a recent stock price jump to launch a stock offer. Financing the company further might well be a good idea but the thought that any stock price uptick will be met with more stock issuance is likely to put something of a cap on future price movements.

As background Quotient announced, two days back, a revenue beat on the quarter. This led to the Quotient stock price jumping 95% at one point. Well, that's nice.

There had been talk about how important a CE Mark had been but as we should know by now that's not, not at all, like an FDA approval. Instead, it's just the paperwork to gain the market to be able to market inside the EU. It has absolutely no implication at all concerning permissions or permits from the regulators.

Still the Quotient results were good, the most appealing factor was that their new product had in fact booked good business in this current quarter. That's good news for the future of course.

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What's causing the stock price decline right now is two things. Firstly, there's that basic fact of a stock offering. Yes, 95% price rises are nice, but they're not so much fun if they're immediately met by requests for more capital. As it happens, the way that percentage price movements work, the Quotient stock price is now back below where it was before the good news about the revenue beat and this quarter sales.

But the big influence here is that Quotient has announced a “$20 million offering” but has then left many of the details undescribed. We don't know if the offering will in fact go ahead. The volume of it – and that sum is about 50% of the current market capitalisation – is unconfirmed and what's worse, the actual terms are as yet unknown. We don't know what price the offering is going to be at that is. So, we cannot work out what dilution might be.

This sort of uncertainty is just not good for a stock price. While the offering will be done under a shelf registration they'll still need to issue a prospectus etc. And we've not seen that as yet either.

So the actual suggestion from Quotient runs along these lines. We've had some good results, so now we're to increase the share capital by some 50% of the current amount. We're not telling you the terms or price just yet. It's not really all that surprising that the Quotient stock price has retreated at that point.

What will matter to the future of the price is two things. Firstly, what those terms turn out to be.
It matters what the price of the new stock will be, obviously. Given the overhang here we can expect a weak Qoutient stock price until the matter is clearer, resolved. The ongoing stock price, after the resolution, will then depend again upon the performance of the business – coloured by whatever dilution there is as a result of this offer.