Having your shares in a company heavily diluted by a big secondary share issue is often scary for investors. It’s easy to see why; if a company dumps a bucket of new stock on the market, existing shareholders’ slice of the pie gets smaller. Their piece of the business is reduced by the incoming stock.
This dilution is about to happen with a clinical-stage biotech that’s currently a market favorite -- gene therapy specialist Spark Therapeutics (NASDAQ:ONCE), which just announced another major share flotation expected to close on August 9. Yet, buoyed by several other pieces of news, the stock has been on a tear the last few days. Investors don’t seem worried at all about the new issue, and I think there’s good reason for that.
