In the last several months the share price of La Jolla Pharmaceutical Co. (PINK:LJPC) dropped from around $3 in March to the sub-penny levels of a few cents. This week, LJPC made an attempt to climb up again, though the climb was shortly interrupted yesterday. 
On Tuesday LJPC share price and trading volume suddenly spiked up, leaving behind a number of resistances for the past two months. Though, the stock could not touch the $0.03 level and during the last session it made a correction downwards. LJPC closed at $0.015 yesterday, a 39.76% decline from the previous. Trading volume nearly reached 18 million shares, an immense value compared to the average daily volume of around 1.5 million.
LJPC spike this week coincided with the filing of the next to last 8-K filing of the company. It announced that La Jolla Pharmaceutical has signed an Amendment Agreement with the holders of a majority of its outstanding preferred stock which would provide the company with additional working capital. The holders have agreed to waive the dividends for the period between June 1 and August 31, 2011. The holders have also agreed to provide working capital in a still unknown amount and to purchase other outstanding preferred stock and warrants from certain current and former employees of the company.
A prerequisite for the signing of the agreement was also that LJPC CEO and CFO agree to get their salaries reduced for the above mentioned period of time, which they have accepted. Today’s session will show if the news was good enough to induce appreciation for LJPC, moreover investors will have also to consider the additional information that was filed to the SEC after market close yesterday.
The company’s latest 8-K says that from June 24, 2011 up to now 34 shares of LJPC Series C-11 Convertible Preferred Stock have been converted into a total of 5,658,498 shares of common stock. Thus, LJPC has now a total of 34,621,819 shares of common stock issued and outstanding.
That makes a market cap of about a half a million dollars, which appears strange given that in LJPC latest 10-Q the company reports cash and equivalents for $6.5 million and no long-term debt. In April this year, the company conducted a 1-for-100 reverse stock split, but it looks like the outspreading shares of convertible preferred stock create too much of dilution risk.
