Cibus Inc., an agricultural biotechnology company specialising in gene editing, saw its shares tumble after announcing an underwritten public offering of its Class A common stock. On 17 September 2024, Cibus made public its intention to raise capital through this offering, leading to a sharp 1.75% decline in its share price to around $5.06 on the Nasdaq exchange. The move has triggered investor anxiety over potential dilution of shares and raised questions about the company’s financial stability and strategic direction.

The underwritten public offering will allow Cibus to grant underwriters a 45-day option to purchase up to an additional 15% of the shares on offer, but the final size, timing, and terms remain uncertain and are subject to market conditions. The proposed offering is expected to raise significant capital, which Cibus intends to use for the development of new seed traits, enhancement of its Trait Machine operations, and general corporate purposes. Roth Capital Partners and A.G.P./Alliance Global Partners will manage the bookrunning for the offering.

Uncertain future as Cibus navigates market conditions

The announcement has not been well-received by the market. Concerns over the company’s financial health, its need for additional capital, and the timing of the offering have added to the uncertainty. Cibus, which is not a seed producer but a technology provider to seed companies, aims to use the net proceeds to further its gene-editing research and development. Still, investors worry that the offering could dilute existing shareholders’ equity, weakening their stake in the company. Existing institutional investors and Chief Executive Officer Rory Riggs have expressed interest in purchasing shares, but their commitments remain non-binding.

Why did Cibus opt for a public offering?

Cibus has made strides in agricultural biotechnology, focusing on productivity traits like Pod Shatter Reduction and Sclerotinia resistance for major global crops such as canola, corn, rice, soybean, and wheat. The company is known for its innovative approach to gene editing, which it claims can deliver results faster and at a lower cost than conventional breeding methods. However, the need to raise capital suggests that the company is either planning an aggressive expansion or is facing cash flow challenges, casting a shadow on its growth narrative.

While Cibus continues to expand its gene-edited trait pipeline and maintain strategic partnerships with leading seed companies, the market remains sceptical. The company has seen fluctuations in its share price over the past year, and this latest move could be perceived as a way to shore up its balance sheet amid a challenging environment for biotech firms.

Expert insights on Cibus’s financial strategy

Financial experts have mixed views on Cibus’s decision to launch a public offering. Some analysts argue that the move could be seen as a proactive measure to capitalise on future growth opportunities, particularly as the company continues to innovate in the agricultural sector. On the other hand, there are concerns that raising capital through an underwritten public offering could suggest underlying financial strain. According to market analysts, biotech companies like Cibus often face a delicate balance between funding research and development and maintaining shareholder value. The decision to raise funds through an equity offering may indicate a lack of alternative financing options, which could raise red flags for investors.

One analyst highlighted, “While the offering could provide the necessary funds for Cibus to continue its cutting-edge research and potentially dominate the gene-editing market, it also sends a message that the company may not be generating enough internal cash flow to fund its operations, which is concerning.”

What lies ahead for Cibus?

As Cibus looks to navigate through these uncertain waters, it will need to convince investors of the long-term value and strategic importance of this offering. The company must also be transparent about its growth strategy and how it plans to utilise the capital raised. The future performance of Cibus’s stock will likely depend on its ability to deliver tangible results from its innovative gene-editing technologies and its capacity to manage market expectations amid a volatile biotech sector.

For those considering investing in Cibus, it is critical to review the preliminary prospectus supplement and accompanying documents filed with the Securities and Exchange Commission (SEC). These documents will provide a more in-depth understanding of the risks associated with the offering and the company’s overall financial health.

  A.G.P./Alliance Global Partners, Cibus, Cibus Inc., NASDAQ, Rory Riggs, Roth Capital Partners, San Diego, United States