Advanced Cell Technology, Inc. (OTCMKTS:ACTC) Gathering Speed
Advanced Cell Technology, Inc. (OTCMKTS:ACTC) had stumbled slightly during the two sessions following its previous rise, but now it’s on the move again, gaining 10.5% yesterday on fresh news, despite the fact that the session was cut short.
By all accounts, it seems that ACTC has been busy, readying itself for significant steps forward lately. Yesterday, it announced that it has entered into another purchase agreement with its “important partner” Lincoln Park Capital Fund, LLC. ACTC released an optimistic sounding piece of PR, that proudly disclaimed that said agreement is for the sale of $30 million worth of shares, but would “not create complications in our capital structure”. So how will that be achieved?
In the press release, ACTC declared that it will be the one that “controls the timing and amount of any sales of common stock to LPC at a known price”, as opposed to the standard procedure with toxic funding. Further, ACTC declared that “LPC cannot require ACTC to make sales, but is obligated to make purchases as ACTC directs in accordance with the terms of the agreement”.
In the 8-K filing on the matter, it was noted that “the purchase price of such Common Stock will be based on the prevailing market price of the Company’s Common Stock immediately preceding the time of sales, with ACTC controlling the timing and amount of any future sales, if any, of Common Stock to LPC”.
Naturally, this does not mean that shares will necessarily be bought at market prices, but their prices will be based on stock prices “immediately preceding the time of sales”. Which can be taken as a sign that the funding will probably not be too toxic… provided that ACTC does not give LPC unreasonable discounts. As of Apr 30, 2014 ACTC had 2.8 billion Shares Outstanding, so this dilution would probably be felt by investors – especially if ACTC plans on making the deal toxic.
In spite of this, this turn of events can easily be viewed as beneficial for ACTC, as it has afforded the company some much needed funds. Generally speaking, dilution is doubltlessly one of the factors investors should be wary of, when calculating the risks of committing to the stock of development stage pharmaceutical companies brings. It is a serious threat to investor value, but in the case of ACTC, it should also be noted that the company has just acquired the right management and seems to have found funds to proceed with its projects, so the money will likely be put to good use. Still, that does not, by any means, signify that the company’s gotten on the fast lane to commercial success. Despite what online analysts may think, ACTC‘s “breakout” is likely to be based on a “rollout”, which will most probably not happen for some time.
Another company that managed to jump more than 10% yesterday, despite the session’s brevity and the multitude of red flags surrounding it, is Baltia Air Lines Inc. (OTCMKTS:BLTA).