Pharmos (Nasdaq:PARS) is a disappointing share that apparently disappointed its investors again yesterday. It fell 10.5% to $3.13. Why the panic? The share dilution? Did any Pharmos shareholder buy shares because of its economic or other value? The company received permission to raise capital on the basis of a shelf prospectus a year ago. It raised part of the money at the time, subsequently battering the share, and repeated the performance yesterday.
It seems that the closer Pharmos nears the date the US Food and Drug Administration (FDA) is due to approve or disapprove dexanabinol, investor anxiety increases. Pharmos raised money at $3 a share, reflecting a 15% discount on the share price. "Why did Pharmos chairman and CEO Dr. Haim Aviv sell his shares cheap?" I ask. "Why doesn’t the share get more recognition now?"
Naturally, I cannot answer these questions, but I have plenty of explanations. Maybe the underwriters told Aviv that institutional investors had an interest in closing the round at $3 a share and he agreed. That may be what the institutional investors think, but only management knows what a company should really do. In the end, success or failure is what counts.
On the other hand, I would recommend to Pharmos that it would be wiser at this time not to announce that the proceeds will be used for anything other than dexanabinol, because that would worry investors. That's why the share fell yesterday: no one knows what dexanabinol's chances really are. Consequently, yesterday's events resulted in a buy opportunity for those who are buying the share for dexanabinol, because the share is now cheaper than it was two days ago. Those buying Pharmos because they believe it will be the next Teva Pharmaceutical Industries Ltd. (Nasdaq:TEVA; TASE:TEVA), well… that's another thing altogether. |
