CStone Pharmaceuticals (HKG:2616) saw its stock price plummet by 8.70% in pre-market trading on Wednesday following the company's announcement of a significant share placement plan. The biopharmaceutical firm, focused on developing and commercializing innovative immuno-oncology and precision medicines, revealed its intention to issue up to 80 million new shares to at least six investors.

According to the company's filing with the Hong Kong Stock Exchange, the placement price is set at HK$2.933 per share. This move is expected to raise approximately HK$232.3 million in net proceeds, which the company plans to utilize for the development of cancer drugs and other general corporate purposes. The new shares will represent about 5.86% of the company's entire share capital following the completion of the placement.

The sharp decline in CStone's stock price can be attributed to the dilutive effect of the share placement on existing shareholders. Investors often react negatively to such announcements as they lead to a decrease in earnings per share and ownership percentage. However, the company's strategic decision to raise capital for drug development highlights its commitment to advancing its pipeline, which could potentially drive long-term value for shareholders if successful.