Thursday, April 11, 2013

Chimerix Prices Its IPO: Update

Chimerix Prices Its IPO: Update

Chimerix (CMRX) was priced 7.32 million shares last night at $14.  The stock was trading at about $16.50 as of mid-day.  Obviously, the offering was well received.  Over 3.1 million shares have already traded.  The company raised $95.3 million, and Wall Street earned $7.2 million on the transaction.

At least on day one, portfolio managers are trying to build a position in the company, which isn’t easy.  Since Aisling Capital III committed to acquire 1.1 million shares, and other existing investors indicated in the preliminary prospectus they might acquire shares, there’s not a great deal of stock to go around.  The final prospectus does not mention whether existing investors purchased shares or not.

The following example may help to explain the upward pressure on the stock.   If a small cap manager wanted to build a 1% position in a $500 million fund, he’d need to acquire about 333,000 shares.  So if there are a dozen or so managers interested in the company, there’s going to be some competition to acquire enough shares to have a meaningful position.

How the stock does in the long run will, of course, depend on whether Chimerix can execute its business plan.

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