ImmunoCellular Therapeutics Ltd (NYSEMKT:IMUC): Here's Our Take

ImmunoCellular Therapeutics Ltd (NYSEMKT:IMUC) is not having a great week. The company just announced an offering that will see it issue a bunch of preferred stock in return for gross proceeds of $5 million and – on the back of the news – has tanked. At market close on July 18, shares went for $0.48 a piece – a more than 60% discount to the company's market capitalization pre-announcement.Regular readers will likely have caught our coverage of this one back at the start of the month. In that piece (which, for anyone that missed it, is available here), we opined as to what might be behind the company's run from less than $1 a share to nearly $3 a share in a matter of days. Our conclusion was relatively simple – that there was nothing fundamentally driving the action and all we could pin it on was speculative loading in anticipation of management reporting a major development. We've been keeping an eye on this one for a while for no other reason than we think the company is going to have to sell itself (or at least its tech) near term and that – in turn – we think that this sale could get the stock moving.The question now is whether that thesis still applies. The short answer: sort of.The upside on this move is that the company is now available for substantially less than new entrants might have had to pay for it a week or two ago. If there is to be any near term news regarding an asset sale or a collaboration on one of ImmunoCellular's three lead programs, or otherwise, then the upside available on any such announcement is likely a little more substantial than it would have been for a trader that picked up shares at or near the peak of the early July run.Price isn’t everything, of course. You've got to look at what price represents, and therein lies the negative side of this story. The company, with the latest raise, is basically adding 7 million shares (actually, a little over) to the current base of 3 million. That's a more than 230% increase in the number of shares outstanding and – when these shares are converted into common from preferred – means the current base is only accountable for 30% of the total company post-raise.From a dilution perspective, that's about as bad as it gets. It's more akin to a takeover than it is a financing, with the new preferred stock owners having picked up a controlling portion of the base for $5 million.Couple this with the fact that, of the $3.8 million ImmunoCellular is set to net from the raise, the company is only in line to have $400K left to invest in operational activity, and things look pretty dire.With that said, however, we still think there may be some value in a buy the dip punt at current prices. The company currently trades for a market capitalization of just $1.6 million. There's no debt on the books and cash on hand isn’t great but it's enough t get the company through to close to the end of the year assuming this raise closes out successfully. With these inputs noted, valuation is all about the value of its programs and for a company with the cash to put ImmunoCellular's assets through late stage development, we think there's way more than $1.6 million in value on offer. The ICT-107 program is in an albeit stalled phase III, for example. If a bigger player wants to fund this phase III to completion it could be a quick turnaround access to a brain cancer program. The same goes for ICT-121 and ICT-140.Bottom line here is that this is a pretty nasty raise and there are no two ways to spin it, but the response looks like an oversell given that there's still plenty of inherent value (to another company) in ImmunoCellular's assets and there could be some upside on current prices as and when these assets change hands.If anyone wants to take a look at the gory details, here's the prospectus.Be sure to catch up on all the details from our previous coverage here before acting.We will be updating our subscribers as soon as we know more. For the latest updates on IMUC, sign up below!Image courtesy of Filter Forge via FlickrDisclosure: We have no position in IMUC and have not been compensated for this article.