What happened Shares of AcelRx Pharmaceuticals (NASDAQ: ACRX) were trading down by 16% as of 11:40 a.m. EST on Wednesday after the company announced the pricing of a public stock offering. AcelRx plans to sell 14.5 million new shares in a transaction expected to generate gross proceeds of around $27.5 million. So what Secondary stock offerings cause stocks to fall for one simple reason: They dilute the value of existing shares. In addition, in AcelRx's case, the biotech company intends to sell its new shares at a 19% discount to its closing price on Tuesday. It's not surprising, therefore, that its share price has fallen to close to that level. Image source: Getty Images. There's a silver lining with the transaction, though. AcelRx will raise additional cash that it needs. Management said it plans to use those funds for "working capital and general corporate purposes, including commercialization activities, general and administrative expenses, research and development expenses, capital expenditures, and for making scheduled payments under its debt facility." That pretty much covers all of the spending areas for the biotech company. The share price slides driven by secondary stock offerings are often only temporary if investors have reasons to be optimistic about the future of the company in question. AcelRx thinks that its progress in commercializing its sublingual opioid painkiller, Dsuvia, could provide such reasons for confidence. Now what The main thing for investors to watch now with AcelRx will be its fourth-quarter update, which is expected in February. AcelRX has already begun to receive initial stocking orders for Dsuvia from the U.S. Department of Defense. These should boost the company's sales over the coming quarters. 10 stocks we like better than AcelRx PharmaceuticalsWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and AcelRx Pharmaceuticals wasn't one of them! That's right -- they think these 10 stocks are even better buys. See the 10 stocks *Stock Advisor returns as of November 20, 2020 Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.Source