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Why Shares of Focus Financial Partners Are Falling Heading Into the Weekend

By Bram Berkowitz - Feb 26, 2021 at 12:01PM

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The company recently said it would launch a secondary offering of 7 million shares of class A common stock.

What happened

Shares of Focus Financial Partners (FOCS 1.38%) had fallen close to 10% around noon today after the wealth management firm reported that it is launching a secondary offering of common stock.

So what

Focus Financial, which typically invests in and partners with independent wealth management firms, recently said it would launch a secondary offering of 7 million shares of class A common stock.

Line with arrow moving downward.

Image source: Getty Images.

Most of that offering -- roughly 6.5 million shares -- will consist of shares from the private equity firms and existing stockholders KKR & Co. and Stone Point Capital. The remaining roughly 463,673 shares are being offered by Focus Financial on behalf of other existing stockholders.

Focus Financial will not receive any proceeds from the sale of the class A common stock offered, and added that the offering would not have a dilutive impact on existing shareholders.

Now what

Stocks tend to fall when companies issue more common stock because more shares means less profits per share. But Focus Financial said the deal is not dilutive, and is essentially just moving existing shares around and not really issuing new ones. 

The company is also coming off a good year in 2020 in which it grew revenue to $1.36 billion, up 11.7% from 2019. For the full year of 2020, Focus Financial reported a nearly $49 million profit, up from a roughly $12 million loss in 2019.

The company's stock price is higher than it was prior to the pandemic and recently hit an all-time high. The company also has a $1 billion war chest to continue its strategy of acquiring the assets from registered investment advisors, so it looks to be in good shape.

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