Liberty disclosed a public offering to sell 8.7 million shares by some large existing shareholders. The selling shareholders could unload an additional 1.3 million shares depending on demand. Liberty isn't selling any stock in the offering and won't receive any of the proceeds.
Some of Liberty's large investors are cashing in following a big rebound in the stock over the past year. Shares are up more than 43% over the last 12 months even after today's sell-off and nearly 400% from the bottom last April when the oil market crashed.
The stock sale comes on the heels of the company's fourth-quarter results, which it posted earlier this month. While Liberty beat analysts' revenue expectations, its loss came in a bit higher than they anticipated. Moreover, its outlook wasn't overly bullish, with the company expecting to maintain 30 frack fleets during the first quarter, about even with the end of 2020.
That dim outlook caused analysts at Bank of America to downgrade shares of Liberty yesterday from neutral to underperform while trimming the bank's price target from $13.50 a share to $11 (slightly above the current trading price following today's sell-off). The bank has concerns about Liberty's fleet-level profitability, given its strategy to grab market share at the expense of margin.
Shares of Liberty have rebounded sharply on the hopes that higher oil prices would fuel a rebound in U.S. drilling activities. That hasn't happened so far because producers are planning to be patient since the oil market remains on fragile ground. Add that lack of a clear near-term upside catalyst to Liberty's strategy to go after market share at the expense of margins, and its stock could languish even if oil prices continue marching higher.