Shares of database software company MongoDB (MDB 4.68%) are down 4.4% as of midday Wednesday, following the company's decision to raise funds by selling newly issued stock.
As other organizations have of late, MongoDB is capitalizing on its stock's recent gains by issuing new shares while prices are elevated. The company announced after Tuesday's close it intends to sell 2.3 million new shares of its common stock, but revised that figure to 2.5 million late Tuesday evening. The offering price of $365 per share was less than Tuesday's closing price of $383.71, offering a discount to new buyers. As of the end of January, 60.9 million shares of MongoDB common stock were outstanding.
Secondary stock offerings are nothing unusual, particularly in the current environment. Many companies' stocks have soared on hopes for a firm economic recovery, even if the recent past's fiscal results aren't exactly impressive. As the adage goes, opportunity knocks but once. If corporations don't cash in now, they may not be able to again -- at least not this well -- for a long while.
It's not unfair to ask, however, if these dilutive fundraisers are truly necessary. MongoDB will use the proceeds from this sale for "general corporate purposes," which ultimately means they will be used to generate business growth. The company was already on pace to grow its top line by 33% this year, though, and expand it another 30% next fiscal year. Without a clear reason to issue so many new shares (at a discount to the current market price, no less) investors are understandably protesting the deal -- by selling already-issued stock.
Fortunately for all involved, MongoDB's underlying database software story has proven to be consistently a compelling one, buoying the stock following any significant dips like today's.