What happened
Shares of Clarivate (CLVT -1.55%) dropped by as much as 15% today after the company announced a pair of proposed stock offerings. The deals will be dilutive to existing shareholders. As of 11:30 a.m. EDT, the stock had partially recovered but was still down 10%.
So what
Clarivate, a technology company that specializes in analytics that went public in 2019 by merging with a special purpose acquisition company (SPAC), is looking to sell $750 million in common stock in addition to $1.25 billion in Series A Mandatory Convertible preferred shares. Additionally, existing shareholders want to sell $250 million in stock through the offering. The offerings will take place concurrently.
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The offerings have not yet priced officially, so certain terms for the convertible preferred such as the conversion ratio are not finalized. As far as the common stock offering goes, the largest existing shareholders that are trimming their stakes are Onex and Baring, two funds that had previously agreed to help take Clarivate public through the SPAC merger. If underwriters exercise the greenshoe option, Onex and Baring will end up still owning 10% and 3.9% of shares outstanding after the offering. Certain executives, including CFO Richard Hanks and director Sheryl von Blucher, are also cashing out some stock.
Now what
The company says it plans to use the net proceeds from the deals to fund a portion of the acquisition of ProQuest, which was announced last month. That $5.3 billion transaction includes a cash component of $4 billion. The offerings are not contingent upon the ProQuest deal closing. If it does not close, Clarivate will use the money for general corporate purposes.
