Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Clearwire's Shares Plunged

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of wireless service provider Clearwire (Nasdaq: CLWR  ) weren't delivering for investors today as they fell as much as 14% in intraday trading after the company announced that it's selling stock.

So what: On Friday, Clearwire issued a press release saying that it plans to start selling up to $300 million of new stock through Cantor Fitzgerald. In its quest to build out its business and network, Clearwire has remained unprofitable and cash flow negative. The company has funded itself through a combination of debt -- it currently carries $4.3 billion in debt on its balance sheet -- and stock sales.

Now what: Shareholders rarely get excited when a company decides to offer new shares because it dilutes the ownership percentage of current shareholders. And for a company like Clearwire, which has a market capitalization of just $650 million, a $300 million stock offering is a very significant one.

The math for investors to think about here, however, is what the long-term value of the new money raised will be. If investors think that management will use the new capital wisely, then it may not be terrible news that the company's selling new shares. A slightly less optimistic twist is that if the company needs the cash to keep the lights on and debt is either not possible or cost prohibitive, then there may be little other choice than to sell new shares.

Want to keep up to date on Clearwire? Add it to your watchlist.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1881256, ~/Articles/ArticleHandler.aspx, 10/22/2016 8:07:30 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 10 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
CLWR.DL $0.00 Down +0.00 +0.00%
Clearwire Corp CAPS Rating: **