Why Vertex Energy, Inc. Shares Crashed 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 Vertex Energy, Inc. (NASDAQ: VTNR  ) have fallen by roughly 14% today following news that the company would sell shares in a private placement.

So what: Vertex is offering 2.2 million shares to institutional investors for $7.75 apiece to raise $17.1 million. The shares will be offered at a 12% discount to Vertex's 30-day volume-weighted average share price, and will dilute existing shareholders by approximately 10%, based on 22.5 million shares currently outstanding. This sale is a 30% discount to Vertex's closing price from yesterday, and even after today's drop, those investors buying in will get a near-20% discount -- however, Vertex shares are still up by nearly 250% over the past year.

Now what: Vertex has grown quite a bit over the past few years, but its real rocket ride has taken place since the start of 2014, as roughly 185% of that 250% past-year pop has happened this year -- 150% of it has taken place in just the past three months. Investors shouldn't appreciate this dilution, but they shouldn't freak out too much either after enjoying such a ride. This is Vertex's second big move in less than a week, and there are likely to be more of them this year, particularly since Vertex's gains have been entirely valuation-driven -- its EPS has actually declined over the past two years. Tread cautiously, as any disappointing news could produce another big drop.

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  • Report this Comment On September 18, 2014, at 8:05 AM, jargonific wrote:

    Had Motley Fool put up more info. on this company I'd have known not to buy it above 8.00. Sad, but delays like this in the way you 'list' companies has caused me such problems before.

    Hope the Fool can come up to speed on such postings. (BTW, cannot even list Vertex on Caps. Won't come up, says knows of no such company..)

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Alex Planes

Alex Planes specializes in the deep analysis of tech, energy, and retail companies, with a particular focus on the ways new or proposed technologies can (and will) shape the future. He is also a dedicated student of financial and business history, often drawing on major events from the past to help readers better understand what's happening today and what might happen tomorrow.

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8/31/2015 4:00 PM
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Vertex Energy, Inc… CAPS Rating: No stars