Updated from 11:34 am EST with Epizyme comment.
With new stock option grants this week, Epizyme (EPZM) executives are sending an ugly message to aggrieved shareholders: We don't mind profiting from your pain.
Biotech stocks are in a tailspin this year, including Epizyme, which is down a staggering 44%. Epizyme executives are at least partly to blame for the steep slide in the company's market value.
During the first week of January, Epizyme chose to price a follow-on stock offering at $9 per share when the prevailing market price for the stock was $15 -- a huge 40% discount.
No other biotech company doing an equity financing at the same time offered as steep a discount as Epizyme.
Epizyme got the deal got done and raised $130 million, but the stock price cratered (it hasn't recovered) and current shareholders were left with with paper losses and a bitter taste in their mouths.
On Wednesday night, Epizyme disclosed regulatory filings detailing a new round of stock option grants to the company's top four executives, including 412,500 options awarded to CEO Bob Bazemore. The stock options were priced at $8.98.
That means if Epizyme's stock price recovers to $15, where it was priced before the company's deeply discounted financing, Bazemore's new stock options would be worth $2.5 million.
"Epizyme's board should have priced those options with a strike equal to where the stock originally was -- $15 -- before the offering. A company's management shouldn't benefit from their own choice to drive the stock price down," said Brad Loncar, portfolio manager at Loncar Investments and co-founder of the Loncar Cancer Immunotherapy ETF.