In what’s been a rather disappointing day in the markets, there are a few pockets of green investors can point to. Among today’s big winners is clinical-stage biopharma company Graybug Vision (NASDAQ:GRAY). At the time of writing, GRAY stock has surged 33% higher on news the company is undertaking a review of strategic alternatives.
The verbiage “strategic review” is typically language tied to a company looking to put itself up for sale. Such is the case for Graybug, which appears to be eyeing either an asset or equity sale, or the outright sale of the entire company. Currently, the company’s board is conducting a comprehensive review to assess these options.
Notably, the company does point out that this review is in its early stages. Accordingly, no assurances have been provided that any sort of transaction will materialize. That said, this is the first step in what’s often a fruitful exercise for a company looking to maximize shareholder value.
Let’s dive into what investors may want to make of this news.
GRAY Stock Soars on Announced Strategic Review
As a clinical-stage biopharma company, Graybug is one of many companies in an interesting spot in the market. Investors aren’t necessarily rewarding growth potential right now. Accordingly, raising capital via equity or debt markets is difficult. More and more consolidation , particularly in the biotech space, could be the result of this environment.
Indeed, it appears Graybug’s move to put itself up for sale is one that could gain traction among other firms in this space. Large-cap biotechs are, in many cases, well-capitalized. Thus, finding juicy acquisition targets in this lower-valuation environment may be more appealing.
Graybug is a compelling option, due to the company’s core optical disease treatments. With a strong pipeline of promising drugs, larger pharma players may certainly have an incentive to pick this company up for its intellectual property and talent alone. In this tight labor market, acquiring talented employees may be a more direct route to growth.
We’ll see how this all pans out. However, I think today’s move higher in GRAY stock makes sense. This is one I’ll be keeping on my watchlist from here.
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On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.