Moleculin Biotech's Volatility, Explained

Moleculin Biotech Inc MBRX’s good-news rally had a short life.

The stock popped 55 percent Thursday after management announced a “breakthrough” discovery of a molecule capable of shutting down tumor activity and treating cancer.

But the stock took a 26-percent downturn Friday after Moleculin announced a $9 million offering and inspired profit-taking.

The series of events wasn’t unusual.

Companies, particularly pharmaceuticals and biotechs, commonly issue offerings off rallies to capitalize on the elevated prices and secure financing at a stronger valuation. Those funds can then advance research and development in yet unprofitable pipelines to set the stage for additional positive reports and more sustainable corresponding rallies.

However, the dilutive offering is poorly perceived by shareholders, whose holdings lose value as supply expands. Investors, then, tend to react by selling on the highs.

Such activity was seen this week in both Dare Bioscience Inc DARE and Aytu Bioscience Inc AYTU, which fell 40 percent and 27 percent, respectively, on offering reports.

Moleculin saw fluctuation between $1.82 and $3.25 over the last few sessions, and shares stabilized around $2.08 Friday afternoon.

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