Recent Public Offering Chops 20% Off the Value of CytRx Corporation (NASDAQ:CYTR)

[[tagnumber 0]][[tagnumber 1]]When CytRx Corporation (Nasdaq:CYTR) announced plans for a public offering of its stock on July 20, CYTR shares slumped by more than 20 per cent as a result thereof. One week later, the offering has been completed but the company has yet to bring about a resurgence of interest in its stock.[[tagnumber 2]] [[tagnumber 0]]Being a biotech with no actual product ready to hit the shelves yet implies little prospects for long–term chart growth and CYTR makes no exception. For the lack of an FDA–approved drug means no cash flows are coming from product sales. Rather, they come from debt and equity financing activities such as CYTR‘s most recent public offering in which the company raked in gross proceeds of approx. $29 million through the sale of 10.5 million shares at $2.75 per share.[[tagnumber 2]] [[tagnumber 0]]At this stage, CYTR‘s assets considerably outweigh its liabilities and this should ensure safe and sound clinical developments for the next few quarters at least. In addition, some Nasdaq analysts remain optimistic about the future of the company giving CYTR a “Strong Buy“ rating, as well as a favourable yearly earnings forecast, expecting the company to start making money in 2018. The projected earnings growth over the same four–year period suggests a high potential for growth, too.[[tagnumber 2]] [[tagnumber 0]][[tagnumber 8]]While analysts remain optimistic about the long–term prospects lying ahead of CytRx Corporation, short–term investors do not seem to be that enthusiastic. What is more, this refers to both insiders and outsiders. According to the available records, no insider buying has occurred for the last twelve months, which suggests that insiders might not be confident enough in the stock just yet. The good news, however, is that no insider selling has taken place, either.[[tagnumber 2]] [[tagnumber 0]]Yet, this does little to veil the huge short interest in CYTR. As of July 15, 2015, there were almost 11 million shares investors are currently short on. The number is huge because it stands against an average daily trading volume of 407 thousand (again, as of July 15, 2015). Back then, it would take shorters a total of 27 days to cover their positions in the event of an upward price movement. As it turned out, however, the stock lost more than 20% just a few days later following the public offering announcement, thus giving traders a good opportunity to cover their short positions. In this respect, it will be interesting to see how this will impact the end–of–month short interest data for CytRx.[[tagnumber 2]] [[tagnumber 0]]Even though CYTR‘s 12–month chart performance does show some good upward movements, the stock‘s most recent slump has resulted in a negatively weighted alpha of –10.7. Compared to the industry average of +27.8, it doesn‘t bode well for the stock right now.[[tagnumber 2]]