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Why Perion Network Stock Tanked This Morning

By Evan Niu, CFA - Jan 20, 2021 at 11:39AM

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The advertising-technology company prices a secondary offering at a discount.

What happened

Shares of Perion Network (PERI 0.38%) tanked as much as 11% this morning after the company announced the pricing of a secondary offering that it launched yesterday. As of 11:40 a.m. EST, the stock had started to recover and was down just 6%.

So what

Perion Network, which specializes in advertising technology, priced the deal at $11.50, which represents a meaningful discount to yesterday's closing price of $13.96. The company announced the proposed $50 million offering yesterday, but the deal was upsized from that amount. Perion sold nearly 5 million shares at the offering price to raise $57.4 million in gross proceeds. Underwriters will have a 30-day option to purchase up to approximately 750,000 additional shares.

Red stock chart going down

Image source: Getty Images.

Separately, Perion also reported preliminary fourth-quarter results yesterday, with revenue expected to be $110 million to $115 million, ahead of the company's guidance of $100 million to $105 million.

Now what

It's not uncommon for companies to price secondary offerings at a discount to the market price in order to incentivize investors to purchase shares through the offering. This allows the company to raise capital without going to the open market.

As of Jan. 11, Perion had 27.35 million outstanding shares, according to the prospectus, so the offering represents over 18% dilution before factoring in the underwriter options. Perion says it intends to use the proceeds for general corporate purposes such as working capital and funding future growth.

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