Ensysce Biosciences Inc (ENSC) shares took a significant hit on Thursday, plummeting by 30% to 44 cents per share. The decline followed the company’s announcement of a $5 million registered direct offering and concurrent private placement.
The company issued 3.55 million shares of common stock at a price of 47 cents per share, a discount compared to its previous trading price. In addition, Ensysce entered into agreements to exercise existing warrants at a reduced price of 47 cents per share, down from $1.06.
As part of the concurrent private placement, the company issued unregistered Series A-3 and A-4 warrants for the purchase of up to 14.36 million shares each, also at the same discounted price of 47 cents per share. These warrants have different expiration periods, with Series A-3 warrants valid for 18 months and Series A-4 warrants valid for five years, both starting from the date of stockholder approval.
Ensysce plans to utilize the proceeds from the offerings to further develop its TAAPTM and MPAR® programs, which are crucial for the company’s drug development pipeline. The funding also complements a recent $14 million NIH grant awarded to the company for the clinical development of PF614-MPAR, an abuse-deterrent opioid with overdose protection.
While the fundraising effort aims to strengthen Ensysce’s financial position and advance its drug development, the discounted share price and large issuance of warrants have raised concerns among investors.
The decision to sell shares at a discounted price may signal the company’s urgency to secure capital. This move can be perceived negatively by investors as it may indicate a lack of confidence in the company’s future prospects and potentially dilute existing shareholders’ value.
Moreover, the issuance of a large number of warrants gives potential buyers the right to purchase shares at a fixed price, which could further impact the stock price if exercised in the future.
The current market dynamics and investor sentiment surrounding Ensysce Biosciences are likely to influence the stock’s performance in the coming days. Investors need to carefully evaluate the company’s financial health, drug development progress, and market competition before making any investment decisions.
