HITK: Private Placement??

S

ShoeshineBoy

Here's a recent story HITK:

"Hi-Tech Pharmacal Co., Inc. Announces $25 Million Private Placement of Common Stock
Friday July 18, 8:53 am ET


AMITYVILLE, N.Y.--(BUSINESS WIRE)--July 18, 2003--Hi-Tech Pharmacal Co., Inc. (NASDAQ NMS: HITK - News) today announced that it has entered into a definitive purchase agreement with certain accredited investors with respect to the private placement of 860,000 shares of its common stock at a purchase price of $29.21 per share, for gross proceeds of $25 million. In addition, the private placement investors have an additional right to purchase up to an additional 258,000 shares of common stock at $29.21 per share. These additional investment rights are exercisable upon closing and will expire 90 trading days after the effectiveness of a registration statement for the resale of the common stock.
The net proceeds to the Company, not including any exercise of the additional investor rights, will be approximately $23.8 million. The net proceeds will be used mainly for the funding of future acquisitions, research and development and for general corporate purposes.

This private placement was made under an exemption from the registration requirements of the Securities Act of 1933, as amended, and purchasers may not offer or sell the securities sold in the offering in the absence of an effective registration statement or exemption from registration requirements. As part of the transaction, the Company agreed to file a registration statement on Form S-3 with the Securities and Exchange Commission within thirty days for purposes of registering the resale of all of the common stock issued in the private placement. "

Can someone translate this for me? "Private placement" means they're diluting their shares, right? Is this common? On the 16th and 17th HITK fell, not coincidentally I am sure, to about $29 because the market knew the company was going to sell so many shares at that price. How can the board allow this? This is over 800k shares which is over 15% of their float? To me this seems like a blatant dilution of their shares as well as a short term manipulation of the market (and may present some interesting opportunies as well!).

Any comments would be much appreciated.
 
I think this was more in response to a negative piece on VIC. This forced the company to take quick action before other investors read the piece and sold as well. Given the circumstances, I think that the company got a good price for their shares. They sold stock at almost 30 a share that is likely worth under 10.


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Pretty amazing. So obviously there was fundamental weakness. Interesting that this happened at the same time that PPDI melted down! I think I've got a good play tomorrow based on that.

So you're saying that essentially it was just that some of the big boys wanted out and not that they were trying to raise capital for some grand and glorious new venture?

Earlier today I actually happened to be reading your post from a few months ago about vic. At that time, you said that they might close soon, so I take it they're going to stay open for a little while longer? Also, from poking around the guest area, it looks like it's fundamental only? Or are a lot of the members in the "technimental" category? Do they accept any "TA" analysis in their submittals?
 
No TA stuff.

No insiders sold there. They were just raising funding. Since it looks like the company will probably loose all competitive advantages starting next quarter, it was a timely sell. I had intend to short it, and was too busy with other stuff, so I never did the DD.
 
Interesting. So in some ways they were able to use the recent run-up to raise larger amounts of capital to hopefully replace a moribund revenue stream. NASDAQ pharmaceuticals are not for the weak! So do you know if this came out of their treasury stock or whatever you call it? Or did they actually issue new shares?
 
Sorry - wasn't trying to get out of research, but the SEC/press release wording was at first confusing to me. It says:

"On July 17, 2003, Hi-Tech Pharmacal Co., Inc. announced that it entered into a definitive purchase agreement with certain accredited investors with respect to the private placement of 860,000 shares of its common stock at a purchase price of $29.21 per share, for gross proceeds of $25 million. In addition, the private placement investors have an additional right to purchase up to an additional 258,000 shares of common stock at $29.21 per share. There were no selling shareholders."

But I guess "its common stock" is pretty obvious. Thx...
 
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