NEW YORK ( TheStreet) -- At least there's a headline now to go along with the volatility in shares of DARA Biosciences ( DARA). After Tuesday's closing bell, the Raleigh, N.C.-based drug developer announced it's commenced a registered direct offering to sell up to $4 million worth of units consisting of Series A preferred stock and warrants. The proposed sale represents substantial dilution to existing shareholders, as the company's market capitalization is around $11.4 million.
The news comes after the two most active trading sessions of 2010 for DARA Biosciences' common shares. Even as the broad market saw thin volumes as the typical lull following the Christmas holiday was exacerbated by the blizzard blanketing the Northeast United States, the stock jumped nearly 75% on Monday to $3.90 with 3.2 million changing hands, far eclipsing its trailing three-month daily average of around 85,000. That move was followed up by Tuesday's plus 20% pullback to $3.11 on volume of 1.1 million after the company declared effective a previously disclosed shelf registration statement, filing a one-page "notice of effectiveness" with the Securities and Exchange Commission. Tuesday's filing referred back to an amended Form S-1 originally filed on Nov. 12 that provided details of a proposed offering of $4 million worth of preferred stock and warrants representing an additional $4 million worth of common stock. A call to DARA Biosciences for comment on the recent movement in the share price wasn't returned on Tuesday, and a message stated the company was on holiday break this week. In its press release, DARA Biosciences said it plans to use the proceeds of the offering for ongoing development of its lead candidates, working capital and general corporate purposes. DARA Biosciences was last able to raise funds in October when it agreed to sell more than 600,000 units of common stock and warrants to several institutional investors, receiving gross proceeds of $1.4 million. In May, shortly after implementing a 16-for-1 reverse stock split, the company launched an underwritten public offering of $10 million worth of securities but it indefinitely suspended the offering on July 1.