Prana Biotechnology Ltd. (NASDAQ: PRAN) may have left shareholders feeling like they got the wool pulled over their eyes this week. The company’s ADRs surged on reports that an article highlighted very positive cognitive responses in Alzheimer’s Disease patients in a study. Then the company announced that it was raising capital in Australia to the tune of $6.1 million (Australian Dollars).
Shares went literally from $1.50 to as high as $4.00 on the news. After the news surfaced on the private placement, shares slid and the stock closed as low as $2.78 per ADR on Thursday. This may not be great for shareholders who bought at the top. The problem is that the company needs more funds and it will likely need more funds yet again in the coming months and years.
Even after the gains this week we still only have a market cap of $67.3 million before the effects of the private placement. The company is pre-revenue and bringing a drug to market generally requires more capital and effort than just what a small company can do on its own.
Where the stock trades in the coming hours and the coming days is one thing. If the company has anything close to what it appears as from the news on the Alzheimer’s Disease front, then this ADR has some incredible opportunity ahead.
It is impossible to say that Prana has the best of the best of all Alzheimer’s Disease candidates. It is just too premature to call it that way with so many unknowns and so many more months of coming news and results ahead of it. Speculators are speculators and they will be busy making their bets this week and next week on the ultimate success or failure of Prana and other biotech players seeking to cure or treat Alzheimer’s Disease.
Prana may deserve this pullback in traditional investing circles. Still, the thought of getting to speculate on a mere $67 million market cap with what may be the best or one of the best Alzheimer’s candidates currently known should be enough to entice many speculators for some time. This is where speculation can easily trump traditional investing.
Shares are flat so far right after the open at $2.78 on more than 200,000 shares after the first five minutes of trading and the 52-week trading range is $1.09 to $4.50.
JON C. OGG