H.C. Wainwright analyst Ed Arce views the selloff yesterday in shares of Madrigal Pharmaceuticals as an overreaction. The stock move appears to be in reaction to Madrigal's announcement Tuesday that 1.2M shares held by Bay City Capital, and affiliated funds, are being sold in a public offering at $107.85, a 9% discount to Tuesday's closing price of $118.50, Arce tells investors in a research note. The analyst believes some investors and traders may have taken this move by Madrigal's long-time top shareholder as some type of negative signal. However, after speaking with management, he points out that Bay City, as a venture capital firm, holds its Madrigal shares in an old, 15-year vintage fund, and has been getting pressure from some of its limited partners to exit. As such, Arce sees no negative read-through or cause for concern from this "relatively small" offering for holders. He affirms a Buy rating on Madrigal Pharmaceuticals with a $215 price target.

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