Here’s Why Momenta Pharmaceuticals Stock Dropped Today

Shares of Momenta Pharmaceuticals (NASDAQ: MNTA) were down 14% at 3:20 p.m. EST on Wednesday following Tuesday's announcement that the biotech plans to raise $200 million, with the potential for $30 million more, by selling additional shares.

It's fairly common for shares to drop after the announcement of a secondary offering. Current shareholders will be diluted when the additional shares are issued, resulting in each share representing a smaller fraction of the company. And secondary buyers typically want a discount to the trading price, so investors today are anticipating the likely change in valuation.

Momenta Pharmaceuticals ended the third quarter with a little over $325 million in the bank, which isn't a terribly long runway for a company that isn't profitable and is a few years away from getting its next drug on the market.

Source Fool.com