Sunnova Energy International (NYSE:NOVA). Rimini Street (NASDAQ:RMNI). OptiNose (NASDAQ:OPTN). What do a solar panel installer; a database software contractor; and a pharmaceutical company specializing in ear, nose, and throat treatments have in common?
They're all stocks suffering big declines today, with Sunnova shares down 10.9%, Rimini stock off 16.2%, and OptiNose bloodied to the tune of 24.8% as of 11:50 a.m. EDT. And they're also all down for the same reason: stock dilution.
Yesterday, Sunnova announced that it has priced a secondary offering of 10 million shares (11.5 million, if underwriters exercise their overallotment option) at a per-share price of $25. On the one hand, that might be good news if it yielded $250 million or more in cash for Sunnova to use to grow the business. Unfortunately, all the shares being sold are being sold by existing shareholders. Thus, none of cash will go to Sunnova.
Rimini and OptiNose had similar news to report this morning. Rimini is pricing 6.1 million shares (7 million with overallotment) at $4.50 per share. The good news here is that it's the company offering the shares for sale and the company that will reap the proceeds -- up to $28.9 million after fees. The bad news is that, when a company issues and sells more of its own shares, it dilutes its shareholders out of part of their stake in the company -- about 9.2% in this case.
OptiNose is doing an own-share secondary offering, too -- 6 million shares initially, with an overallotment option that could see an additional 900,000 shares sold, all at an offer price of $5.85 per share. Again, the idea here will be to raise cash for the company -- at the cost of diluting existing shareholders.
So is this good news or bad news for investors? Judging from the share price declines, investors are less worried about Sunnova insiders "dumping" shares on the market than they are about Rimini and OptiNose diluting their shareholders out of part of their stake.
Indeed, investors appear particularly upset about the dilutive offerings being priced so much lower than their shares were worth before the stock sales were announced -- because as we can see, the share prices of those two companies are now well below the companies' respective offer prices. At Sunnova, at least, the shares today have fallen no farther than the price at which selling shareholders are offering to sell their shares.
This is probably a function of how well the stocks have performed for investors already. In the case of Rimini and OptiNose, both stocks are now underperforming the market over the past year. Sunnova shares, on the other hand, have gained 155% over the past year.
Of the three, investors seem to think Sunnova stock has the best chance of continuing to rise in the quarters and years to come.