Shares of ADT (NYSE:ADT) fell 13.3% on Wednesday after the security products company announced a secondary offering late on Tuesday.
Several investment funds overseen by Apollo Global Management offered to sell 43.5 million shares of ADT common stock. The stock will be sold for $10 per share, which was lower than some investors expected, and ADT's share price fell in kind. After closing at $10.80 on Tuesday, ADT's shares fell to a closing price of $9.36 on Wednesday.
So why did ADT's stock fall below its offering price? Investors were likely a bit concerned that company insiders were selling their shares at a lower-than-expected price. Apollo is ADT's largest shareholder, and several current and former ADT executives are also selling stock in the offering.
It's important to note that ADT is not selling any shares. It will not receive any cash from the stock offering, and therefore will not benefit financially from the sale. While its press release said the secondary offering was "designed to improve liquidity" in its publicly traded stock, it's unlikely to have much of an impact, as more than 100 million shares were already available on the market for trading purposes.
This is more about major stockholders selling off some of their shares to other investors. Insider sales can often be a red flag for shareholders, and some of them decided to sell their own shares on the news.