TransEnterix announced it applied for U.S. approval of its Senhance surgical robot and that it raised enough cash to get it through the year, but its shares plummeted as investors apparently focused on the negatives that come with the company’s latest public offering.
Shares of the Morrisville company closed Friday at 65 cents, down 44 cents – or 40 percent.
Todd Pope, CEO of the 110-employee company, wasn’t surprised that investors reacted negatively after the company said Friday it expects to receive $24.9 million, before deducting underwriter’s fees and expenses, from its offering of stock and warrants. Units consisting of one share of common stock plus a warrant to purchase three-quarters of a share of common stock were priced at $1 each.
Selling additional shares dilutes shareholders’ ownership stake and reduces earnings on a per-share basis.
“Dilution comes along with this,” Pope said. “Sometimes that causes people, in the short-term, to sell.”
In addition, Pope said, investors may have been surprised at how large the offering was.
But TransEnterix needed the money. The company previously had cautioned in filings with the Securities and Exchange Commission that it didn’t have enough cash to get it through 2017. The company had $34.6 million in cash as of Dec. 31.
“We wanted to raise cash to get us to 2018,” Pope said. He also said the money will finance the U.S. rollout of it Senhance system, assuming it is approved by the Food and Drug Administration.
Pope hailed the filing seeking approval of Senhance as “a major milestone for the company,” but the news was tucked away in the press release that announced the company’s public offering.
Pope noted that, under SEC regulations, “you’re really not allowed to make a super-positive announcement prior to a financing.”
TransEnterix anticipates the FDA will rule on the Senhance application by the end of this year. The Senhance system is already sold in Europe.
Pope said the Senhance system will include re-usable instruments, a first for a surgical robot.
“That will really minimize procedure costs,” he said.