NEW YORK (AP) -- Shares of Horizon Pharma Inc. plunged 24 percent Thursday after the drugmaker announced a price for its share offering that will greatly increase the number of its stock outstanding.
THE SPARK: Horizon Pharma said Thursday morning that its offering, for common stock and warrants to buy another half-share, priced at $3.50 each. The company's stock closed at $4.58 on Wednesday.
The sale, of 21.4 million units, is expected to raise about $75 million. Underwriters may buy another 3.2 million shares and 1.6 million shares via warrants.
THE BIG PICTURE: Horizon Pharma, based in Deerfield, Ill., develops treatments for arthritis pain and ulcers. The company said it intends to use the sale's proceeds for the commercial launches of its lead drugs and for general corporate purposes. The company, which went public last year, is unprofitable.
There were about 33.8 million Horizon Pharma shares outstanding as of June 30. The new offering could result in as many as 36.9 million additional shares being issued.
It's not uncommon for a company's stock to fall in the short term after it announces an offering of new shares. The dilution of existing shareholder value can scare off investors.
SHARE ACTION: The shares tumbled $1.10, or 24 percent, to end at $3.48 in regular trading Thursday. The have traded from $3.05 to $8.99 over the past year. The company's initial public stock offering, in July 2011, priced it at $9 per share.