Eight million shares of Restoration Hardware stock will soon go on the market at an offering price of $70 per share. Underwriters may also exercise an overallotment option to sell an additional 1.2 million shares, potentially raising the total value of the offering to as much as $644 million in cash.
Although described in a company press release as a "follow-on" offering, the details of the company's announcement makes clear that this is actually a "secondary" offering of shares -- a sale by existing large stakeholders, cashing out their stock at a profit. As such, Restoration Hardware notes that "the Company will not receive any proceeds from the sale of shares."
Markets reacted poorly to the proposal, as Restoration Hardware shares dropped 3.8% in Friday trading to close at $68.60, 2% below the secondary offering price.