Shares of Kornit Digital (NASDAQ:KRNT) tumbled more than 11% by 2:30 p.m. EST on Tuesday after the printing solutions company priced a secondary offering of its shares well below the recent share price.
Kornit Digital priced an offering of more than 3.1 million shares today at $20.50 apiece, well below Monday's $22.32 closing price. That's a significant number considering that the company only had 35.4 million shares outstanding. However, what's noteworthy about this stock sale is that the company isn't selling any shares and, therefore, it won't dilute existing shareholders, nor will the company receive any of the proceeds. Instead, the offering will facilitate a sale of shares by Fortissimo Capital Fund.
The selling shareholder is taking advantage of the stock's recent run-up to book some profits. Shares were up more than 40% on the year due to the company delivering stronger-than-expected results throughout the year. However, in order to sell that much stock, the selling shareholder needed to price shares at a discount so that the market could absorb them.
Today's sell-off in Kornit Digital is due primarily to profit-taking, not only by a large shareholder but by other investors that are following its lead, made worse by a down day in the market. Because of that, the sell-off is not thesis-altering news. That's why investors should ignore the move and instead keep their eyes on the company's operations, which have been performing well this year.