Zomedica Corp (NYSEAMERICAN: ZOM) had a rough day in the market yesterday after announcing that it has increased the size of a public offering 7 fold due to high demand for the stock. However, it’s recovering this morning as investors realize that the offering will put plenty of money in the company’s bank for the launch of TRUFORMA and beyond.
Here’s what’s happening:
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Zomedica Increases Offering Size
As mentioned above, Zomedica took a bit of a dive in the market yesterday after announcing that it has increased the size of a previously-announced public offering due to demand. The offering now consists of the sale of 91,315,790 shares of common stock at a price of $1.90 per share.
The underwriter also has a 30-day option to purchase up to an additional 13,697,368 shares at the offering price.
In the release, ZOM said that the increase means that the offering will generate about $173.5 million before deducting underwriting discounts, commissions, and other offering expenses.
The TRUFORMA Launch Is Coming
While public offerings of common stock are never fun, as could be seen from the sharp declines in the value of ZOM stock yesterday, investors seem to be shrugging it off, sending the stock back for the top today.
The reason is simple.
With the upsized offering, the company will have plenty of money in the bank, and there couldn’t be a better time for it. Don’t forget that on the 30th of next month, Zomedica will be launching its TRUFORMA pet diagnostics product, which is expected to make waves when it hits the market.
The TRUFORMA platform is capable of detecting several ailments commonly seen in our furry friends. Importantly, many of the ailments the platform picks up on had no diagnostic testing prior to TRUFORMA. Moreover, some of the ailments required samples to be sent to a lab, which took days, or even a week or more, to generate results.
ZOM and its TRUFORMA platform have the ability to provide vets and pet owners results in a matter of minutes, rather than days, as TRUFORMA is a point-of-care platform. As a result, it’s expected that demand for the platform will be incredibly high.
Retail Investors Band Behind ZOM Stock
Another factor that’s likely helping to push ZOM stock for the top after the painful declines experienced yesterday is that retail investors are standing behind the company. In fact, these investors have led the stock on a dramatic run for the top in recent weeks, and will likely continue doing the same.
Moreover, there’s quite a bit of short interest in the stock, and we’ve seen what retail investors are capable of when it comes to heavily shorted stocks.
Considering the fact that the Wall Street Bets Reddit recently declared war on hedge funds that are short biotechnology companies, ZOM stock remains a prime target for the continuance of a massive short squeeze.
What Analysts Think About ZOM Stock
At the moment, there aren’t many analysts that are diving into Zomedica stock. In fact, according to TipRanks, there’s only one. However, that analyst holds a positive opinion, rating the stock a Buy.
While it’s never a good idea to blindly follow analysts, as many of them work for firms with vested interests in the stocks they cover, analysts’ opinions are a great way to validate your own, well researched, well thought out opinion.
Risks to Consider Before Buying ZOM Stock
Before diving into ZOM stock, it’s important to consider the risk. After all, there’s no such thing as a risk-free investment. In terms of Zomedica, here are the most significant risks to consider:
- Speculation. Much of Zomedica’s value is the result of the fact that the company will launch TRUFORMA relatively soon. With the benefits the platform offers over currently available diagnostics tests, it’s expected that the platform will be met with heavy demand. If this isn’t the case, and sales aren’t what investors are hoping for, significant declines may be the result.
- Profitability. ZOM is still far from achieving profitability. While the recent offering puts plenty of money in the bank, the lack of profitability shows that the company’s business model is unproven to date.
- Volatility. Finally, ZOM is subject to extreme levels of volatility, making entrance and exit decisions difficult and opening the door to potentially significant declines over a short period of time.
While there are risks to consider before diving into Zomedica stock, you’ll be hard-pressed to find an investment that offers any kind of return without risk. It’s all part of the game.
Nonetheless, ZOM stock has a lot going for it right now. With the launch of the TRUFORMA platform just around the corner, significant revenue may be on the horizon. Moreover, with the offering that’s in play at the moment, the company will have a long financial runway to reach profitability. All in all, ZOM stock is one to watch.