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Medical device company Sharps Technology (NASDAQ:STSS) is enjoying a massive surge in its share price today following the close of its initial public offering (IPO). STSS stock is up more than 40% currently after the company announced the conclusion of its IPO of 3.75 million units. Despite this, the stock is still down roughly 50% from its IPO price of $4.25.

So, what has investors so excited about Sharps' recent stock offering?

Well, this morning the New York-based company announced the conclusion of its IPO. On April 14, the company began trading on the Nasdaq exchange under the STSS and STSSW symbols. The latter ticker represents the warrants the company issued alongside its common stock. Warrants give holders the option to purchase the underlying stock at a pre-arranged price. In this case, each warrant gives holders the option to purchase one share of Sharps common stock at the exercise price of $4.25.

STSSW is also enjoying a pleasant day today. The warrants are up roughly 20% at the time of writing, currently trading at about 70 cents.

Sharps reported issuing a total of 3.75 million shares of common stock and 8.625 million warrants. This equated to $16 million in gross proceeds. This includes 1.125 million warrants purchased as part of an overallotment option by the underwriter, Aegis Capital.

Given that STSS slipped substantially during its IPO, what's behind today's jump?

STSS Stock Jumps as IPO Closes

Sharps' jump today is most probably attributable to its underwriter. Aegis partially exercised its overallotment option recently, likely to stabilize fast-falling STSS stock.

Underwriters are often given an overallotment option to issue more shares if the value of a stock exceeds its offering price, raising additional funding for the company. However, because SSTS stock slipped dramatically from its opening price, Aegis partially exercised the overallotment option in order to dry up supply. This effectively buoyed the quickly falling shares.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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