Shares of homebuilders fell Thursday after Hovnanian Enterprises Inc. said it plans sell 14 million shares to raise cash.
Hovnanian, like other builders, is struggling amid a prolonged downturn in the housing market. Hovnanian didn't price the offering, which was announced late Wednesday. Based on Thursday's closing price the offering would raise $134.4 million. The company said it would use the money for "general corporate purposes."
Lehman Brothers analyst Megan McGrath said, in a note to clients, that the majority of the proceeds would likely be used to pay down debt, but after the offering, the company's debt to capital ratio will likely remain high compared with other homebuilders. She rates the shares "Underweight."
Red Bank, N.J.-based Hovnanian's shares slid $1.53, or 13.8 percent, to close at $9.60 Thursday.
Other homebuilders also declined.
Centex Corp. fell 41, or 2 percent, to $21.67; Pulte Homes Inc. dropped 43 cents, or 3.1 percent, to $13.26; D.R. Horton Inc. declined 55 cents, or 3.5 percent, to $15.19; Ryland Group Inc. fell $1.33, or 4.1 percent, to $31.14; and KB Home lost 58 cents, or 2.4 percent, to $24.04.
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