Should you buy Mesoblast shares?

Posted: 3 March 2021 6:28 pm

Mesoblast is one of the four most shorted stocks on the ASX.

The Mesoblast Limited (ASX: MSB) share price is under pressure this week, with stock prices dipping by a noteworthy 4% on Tuesday ($2.48 to $2.31) within a span of just 4 hours.

This comes in the wake of the company announcing its performance numbers for the second half of 2020 late last month. The company generated a revenue of US$3.5 million and a loss after tax of around US$48.9 million.

The report also showed that the company had a net cash outflow of US$60.1 million, leaving Mesoblast with a total cash balance of just US$77.5 million at the end of last year.

As a result of its dwindling balance sheet, the firm announced that it has initiated a proposed equity-based private placement to a targeted industry investor. In this regard, earlier this morning, the firm announced that it had obtained backing from US-based strategic investor SurgCenter Development to the tune of $US110 million ($138 million).

Lastly, it's worth noting that since hitting a relative high of $4.69 back in Dec 2020, MSB has been on a path of steady monetary descent, with the stock witnessing a sharp decline of around 40% between Dec 17 and 21. Since then, MSB’s value has been faced with negative market momentum.

At the time of writing, Mesoblast is the number 4 most shorted stock on the Australian Securities Exchange with 9% stock shorted.

What does Mesoblast’s latest lifeline mean?

Mesoblast Limited is an Australian-based regenerative medicine company that provides its clients with a wide array of novel treatment avenues for ailments related to muscular inflammation, back pain and cardiovascular disease.

In this vein, the company’s above mentioned $138 million deal will allow it to prepare for a number of FDA-mandatory confirmatory trials that are a part of its different lead programs.

Additionally, the company’s management has stated that the incoming funds will enable Mesoblast to continue its investment into the manufacturing sector, primarily for the faster and more efficient creation of 2D and 3D bioreactor technologies.

Lastly, it bears mentioning that Mesoblast has $US91 million in contractual cash outflows – including $US29 million of trade payables – that need to be doled out in phases over the course of the next 12 odd months, thus making MSB’s future monetary outlook quite bleak.

How to buy Mesoblast (MSB) shares

In order to buy Mesoblast Limited shares, you'll need to sign up with a broker that provides you with access to the Australian Securities Exchange (ASX). Completing the sign-up process is fairly easy and in order to start trading, you’ll have to provide your broker of choice with information such as your personal ID and tax file number.

Once done, you’ll have to fund your account, following which you will be able to start buying ASX-listed stocks. To buy Mesoblast shares, all you need to do is search for the share name or ticker symbol – MSB in this case – and facilitate your purchase.

The stock does not pay any annual dividends, so investors looking for passive income streams may want to bear that in mind before investing. Potential buyers can look to make use of various trading tools such as limit orders, which allow investors to obtain the stock at their desired price, to capitalise on MSB’s ongoing shorting trend.

Lastly, investors can look into techniques such as dollar-cost averaging, which smooths out buying at consistent intervals and amounts, as well as diversify their existing portfolios to minimise their long-term financial risks.

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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