When a company announces that it's raising $30M, your next question is: What for? And if you've already bought in and have no cash on the side to average down, you grimace, knock-back another beer, hide the truth from your loved ones, suck it up, and dream of a better day. But if you don't own a single share, but have been studying the company awhile, you may decide this is just about the time to jump in. My opinion is this: Sit tight. Let the price dip. AVI may be gaining revenue, but it is still losing money. Patience is advisable.
On the day before April Fool's Day, shareholders read news that AVI Biopharma (AVII) was selling 20M common shares at a price of $1.50. From the 2011 high of $2.58/share on January 10-11, the announcement took the stock to $1.55/share on 1 April. The share price hasn't been this low since July 12, 2010.
AVI has certainly seen its low point. On December 15, 2008 it dipped to a 48 cent sickening low. But since then, AVI has steadily climbed to a high of $2.40/share on August 3, 2009 and $2.49/share on January 10, 2011. Yet, I suggest you study its two-plus year chart. Its next low touched $1.15 on March 29 and May 10, 2010. Its recent low was $1.55 on April 1, 2011. If you look at the charts, this signals the beginning of a potential enty point. That is, if you like the direction AVI is heading.
But with my entry point talk, I add a word of caution. I think AVI could go lower. For long-term buyers, I suggest an entry price below $1.50/share with an absolute base of $1.10/share. The patient investor may want to sit back and let the share price come down. Why? Because this is a company with an early stage dominated pipeline and from what I see, a good dose of speculative buzz. But $1.20 - $1.30 could be an excellent entry point for the new investor.
Yet coupled with this, I add an observation. The stock-funding announcement read:
The Company currently intends to use the net proceeds from this offering for general corporate purposes, including research and product development, such as funding clinical trials, pre-clinical studies and otherwise moving product candidates towards commercialization.
My criticism is the announcement puts it emphasis on what it states first: "General corporate purposes." I don't like that. Which is why I think investors who like the company should wait before entering. Telling the street that the company is raising money for "general corporate purposes" is common-place, and yes, they do go on to mention the pipeline and its advancement. But my question: What about the pipeline? What does AVI intend to use the money for? On that point, I give AVI low marks. I think they owe present and future shareholders a more detailed explanation. Tell us how you plan to spend the money to advance pipeline development. If I were a shareholder, it would irritate me that they don't do this.
A fund-raising press release should explain the company's vision. Tell us why raising capital is essential. Don't give us the generic pablum. Be specific. Which is why investors thinking about getting in, should wait. The dip here could go lower and the upside doesn't appear to be imminent. Maybe I'm wrong, but that's my read. If you don't own shares here, I'd suggest waiting. I think the share price could go lower. If long-term investors are agitated, I can certainly see why.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.