The main thing defining the recent action is the company’s IPO itself. CODX raised $7 million with a downsized offering of 1.2 million shares at $6 a share, below the expected range of $6.35 to $6.75.The action turned lower right off the bat, closing the initial week sharply lower (we saw one report suggesting that shares closed essentially flat, which is far from true, as the stock closed its first week down roughly 7%).
The action continued to the downside in week two, with the stock diving another 20-25%. And therein lies the interest we have.
Often times, a new, fresh IPO will dive in the first 10-14 days. The structure of the deal is at issue, and who got shares into the IPO on a non-lock-up basis. We have a sense that this deal was underwritten into the market with an allowance that granted some folks the ability to monetize the early action. That will almost always lead to a bit of a tumble out of the gates.
But the problem is, for all those folks that just jumped in long on the IPO when it started trading, they see that tumble and get nervous. That nervousness leads to emotional selling, which in turn leads to a possibly very undervalued stock.
Hence the alert today.
Since the IPO, the company put out a press release noting that, concurrent with the recent offering, Co-Diagnostics noteholders converted over $3.7 million of principal and interest, leaving the Company debt free.
The Company intends to use the proceeds from the offering to expand existing operations and the availability of its products.
Proceeds may also be used in the Company’s pursuit of regulatory approvals. Co-Diagnostics intends to license certain technologies to research institutions, as well as to CLIA laboratories interested in using them in the creation of laboratory developed tests (LDTs).