Shares of Tellurian Inc. (NASDAQ:TELL) were off by more than 10% by 10:30 a.m. EDT on Tuesday after the natural gas infrastructure company priced a public offering of new shares.
Tellurian sold 12 million shares to the public for $118.8 million, or about $9.90 each. That's around a 10% discount to where shares closed yesterday, which is why the stock fell today. In addition to that sale, the company gave underwriters the option to buy another 1.8 million shares within the next 30 days at that same price to cover any additional demand from investors.
Tellurian plans to use the cash for general corporate purposes, including the development of pipelines to support its Driftwood liquified natural gas (LNG) facility. The LNG project alone could cost upwards of $15 billion, while the pipelines and related infrastructure could cost another $7 billion. In other words, today's equity offering is just a drop in the bucket compared to the capital the company needs, suggesting it won't be the last dilutive offering (and it certainly wasn't the first).
Tellurian is a very early stage company that needs to raise billions in capital to build two massive natural gas infrastructure projects. While Driftwood's development could create significant value for investors, it's several years away from being a reality, and that's if the company secures the necessary approvals. That makes it a very high-risk energy stock, but one with an equally high potential reward.