Shares of online retailer Overstock.com (NASDAQ:OSTK) plunged as much as 13.5% in trading Tuesday after the company announced an offering of common stock. The sell-off eased a little late in the day, but shares were still down 10% as of 1:45 p.m. EDT.
Overstock said it intends to sell 4 million shares of stock in a public offering with underwriters expected to have the option to buy another 600,000 shares if there's an overallotment. The company has been struggling with weak financial results as competition has encroached on the business.
Overstock didn't say exactly what the funds will be used for, but it's safe to say it wants to shore up the balance sheet.
Dilutive share offerings are rarely cheered by investors, and it's a negative reaction to the offering that's pushing the stock lower today. I would expect to see the offering price come out soon, and if it's below the current share price, we could see the stock move even lower. For a company as mature as Overstock, I don't see any way to spin this offering as a positive.