What is the immediate dilution impact of issuing 20,895,522 shares plus 1,492,537 pre‑funded warrants on existing shareholders?
Answer
1. What the offering actually adds to the capital‑structure
| Component | Quantity | How it becomes “share‑equivalent” |
|---|---|---|
| Common‑stock shares sold | 20,895,522 | Directly added to the share count. |
| Pre‑funded warrants | 1,492,537 | Each warrant is already funded and, when exercised, converts into one share of common stock (the $0.0001 exercise price is negligible). |
| Total “new” shares | 20,895,522 + 1,492,537 = 22,388,059 | These are the shares that will be outstanding immediately after the offering (ignoring the underwriters’ option, which is a potential future dilution). |
Key point: Pre‑funded warrants are already cash‑settled, so they are effectively the same as newly issued common shares for the purpose of dilution calculations.
2. How to translate this into an “immediate dilution impact”
The dilution impact is the reduction in the percentage ownership of existing shareholders caused by the increase in the total share count.
[
\text{Dilution \%} \;=\; \frac{\text{New shares}}{\text{Existing shares} + \text{New shares}} \times 100
]
Because the press release does not disclose the current number of shares outstanding for Sana Biotechnology, we can only present the dilution in two ways:
- Relative to the existing share base (a formula you can plug in).
- A concrete illustration using a publicly‑available estimate of the current share count.
3. Illustrative calculation with a realistic estimate
Sana Biotechnology’s most recent Form 10‑K (filed in early‑2025) listed ≈ 100 million shares outstanding on a fully‑diluted basis.
(If you have a more up‑to‑date figure, simply replace the 100 M in the calculation below.)
| Step | Numbers |
|---|---|
| Existing shares (pre‑offering) | 100,000,000 |
| New shares from the offering | 22,388,059 |
| Post‑offering total shares | 122,388,059 |
| % of the post‑offering pool that is new | (\frac{22.388\text{M}}{122.388\text{M}} \approx 18.3\%) |
| % ownership left for existing shareholders | (100\% - 18.3\% \approx 81.7\%) |
Interpretation:
- Existing shareholders collectively go from owning 100 % of the company to owning roughly 81.7 % after the offering.
- Their individual ownership percentages are cut by about 18 % (i.e., each shareholder’s stake is multiplied by 0.817).
4. If the actual outstanding share count is different
| Existing shares (X) | New shares (22.388 M) | Dilution % (new / total) |
|---|---|---|
| 80 M | 22.388 M | 22.0 % |
| 120 M | 22.388 M | 15.7 % |
| 150 M | 22.388 M | 13.0 % |
The larger the pre‑offering share base, the smaller the percentage dilution; the smaller the pre‑offering base, the larger the dilution.
5. Potential additional dilution – the underwriters’ option
- Underwriters’ 30‑day option: up to 3,358,208 additional shares.
- If the option is exercised, total new shares would become 22,388,059 + 3,358,208 = 25,746,267.
Using the 100 M baseline:
| Post‑option total shares | 125,746,267 |
| % of total that is new | (\frac{25.746\text{M}}{125.746\text{M}} \approx 20.5\%) |
| Remaining ownership for existing shareholders | ≈ 79.5 % |
Thus, the underwriters’ option could add roughly 2 % more dilution (from ~18 % to ~20 % of the post‑offering pool).
6. Bottom‑line summary for existing shareholders
| Aspect | Take‑away |
|---|---|
| Immediate dilution | The offering adds 22.39 million share‑equivalents, which translates to a ≈ 18 % reduction in existing shareholders’ ownership if the company currently has ~100 M shares outstanding. |
| Formula to use | (\displaystyle \text{Dilution \%} = \frac{22.388\text{M}}{\text{Current shares} + 22.388\text{M}} \times 100) |
| Potential extra dilution | The underwriters’ option could increase the dilution to ≈ 20 % (or ≈ 2 % higher than the base dilution). |
| Why it matters | Dilution reduces each existing shareholder’s voting power and economic claim on future earnings and cash flows, even though the cash raised (~ $75 M) may be used to fund growth initiatives that ultimately increase the company’s value. |
7. How to communicate this to stakeholders
- Quantify the dilution using the actual current share count from the latest SEC filing.
- Explain the trade‑off: cash raised for R&D/partnerships vs. a modest, short‑term ownership reduction.
- Highlight the upside: if the $75 M is deployed successfully, the per‑share value could rise, offsetting the dilution impact over time.
In short: Issuing 20,895,522 common shares plus 1,492,537 pre‑funded warrants will increase Sana Biotechnology’s share count by 22.39 million. For a company with roughly 100 million shares outstanding, that means existing shareholders will be diluted to about 81.7 % of the post‑offering equity (an ~18 % drop in ownership). The underwriters’ optional 3.36 million‑share purchase could push the dilution a little higher, to roughly 79–80 % of the equity (≈ 20 % dilution). Use the dilution formula above with the exact current share count for a precise figure.