Why Green Plains Renewable Energy's Shares Dropped

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 Green Plains Renewable Energy (NASDAQ: GPRE  ) dropped as much as 10% today after the company announced a bond offering.

So what: Green Plains priced an offering of $100 million in convertible senior notes due 2018, a larger offering than a previously announced of $75 million. Underwriters will have a 30-day option to purchase as much as $20 million in additional notes.  

Now what: These notes could be converted to shares of Green Plains at a price of $20.85 after April 1, 2018 if the company elects not to pay cash. This could dilute the stock by potentially adding 5.8 million shares to the float. That could limit upside for investors, which is a concern today. The interest rate of 3.25% on the notes is also relatively high given low interest rates and the convertibility. In the end, investors don't like either the interest rate or the potential dilution for shareholders.

Interested in more info on Green Plains Renewable Energy? Add it to your watchlist by clicking here.


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