What happened

Shares of container shipping company Costamare (NYSE: CMRE), which surged strongly earlier this month, are giving up their gains today -- down 9% as of 11:35 a.m. EDT.

So what

Yesterday after close of trading, Costamare announced plans to float at least 12.5 million new shares of stock, and perhaps as many as 14.525 million if underwriters choose to exercise an overallotment option. The new shares, which Costamare plans to offer at $7.10 per share, could raise as much as $103.1 million in cash for Costamare before deducting an "underwriting discount and other offering expenses."

Costamare says that it "plans to use the net proceeds of the offering for capital expenditures, including vessel acquisitions, and for other general corporate purposes, which may include repayments of indebtedness." (But also may not.)

Dropping stock chart

Image source: Getty Images.

Now what

Costamare says that "members of the Konstantakopoulos family, who in the aggregate own a majority of the common stock of the Company, have agreed to purchase approximately $10 million of shares in the offering," expressing their confidence that the capital raise is a good deal for shareholders -- but not everyone's convinced. Why not?

With Costamare currently carrying nearly 10 times as much debt on its balance sheet as it has cash on hand, that sounds like a good plan -- the debt-paying-down part, at least. But even so, $103 million (before fees) in extra cash won't make much of a dent in Costamare's $1.35 billion debt load. The likelihood that Costamare will spend far less of its newfound cash on debt repayment than on ship purchases (possibly with the addition of even more debt to pay for them) suggests that when all's said and done, Costamare's balance sheet could end up looking even uglier after this share floatation than it did before.