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 construction equipment provider H&E Equipment Services (Nasdaq: HEES ) rose 10% after announcing a debt offering and potential dividend.
So what: Today, management announced that it's offering $480 million of new senior notes in a private placement. The proceeds are expected to be used to repurchase 8-3/8% senior notes due in 2016, and pay a one-time dividend of about $246 million. The dividend would be worth about $7.00 per share to shareholders.
Now what: The move will allow the company to transfer some of its financing from equity to debt, adding more leverage to the business. The sheer size of the potential dividend is what has driven shares higher today, but investors should keep in mind that none of this is a done deal.
Because nothing fundamentally changed with the company today, I think it’s a good time to sell. This will add leverage and risk to the company, and this pop won’t likely last after the dividend is paid out, unless the fundamentals improve.
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