Bankers made a killing in low liquidity stock at Wall Street.
On Thursday, SalmonBusiness reported that the GM salmon farmer AquaBounty was seeking USD 200 million (the next day this sum was changed to USD 150 million) share issue.
AquaBounty has struggled for a long time, primarily related to the modest demand for genetically modified salmon. This morning, US foodservice giant Aramark issued a clear message that the company would not buy it.
The fish farming company can also not exactly be accused of overselling in its sales pitch for the capital raising:
“We have incurred significant losses since our inception. We expect to continue to incur significant losses for the foreseeable future, and we may never achieve or maintain profitability,” AquaBounty wrote in the prospectus.
Two banks took on the job of raising the money, Oppenheimer and Lake Street Capital Markets respectively.
The duo guaranteed the issue amount against a condition of so-called “deep discount,” a 20.8 per-cent, according to a document obtained by Bloomberg.
The share issue price was set at USD 8.50. The banks raised the money themselves on their own books.
Then the brokers sold the shares in the market to the huge volume of private investors speculating in these relatively small stocks.
“Maybe you know the film «The Wolf of Wall Street», but bankers must feel like in the film making profits by selling bullshit to retail investors. Looks like those brokers for AquaBounty made USD 13 million profit yesterday since more shares traded (16.5 million at an average of USD 9.45) than newly issued (USD 13 million),” wrote an international financial source in an email to SB.
Just before the Wall Street stock exchanges are opening on Friday morning, the buyer price for AquaBounty shares was USD 9.62. The company’s market cap is USD 517 million.