What happened
Digital and technical consulting company Grid Dynamics Holdings (GDYN -2.76%) stock was climbing on Thursday as the company announced the pricing of its upcoming common stock offering. Shares were up 16.4% as of 11 a.m. EDT and had been up as much as 17.9% on the news.
So what
This morning, Grid Dynamics announced that it is pricing its common stock offering at $15.03 a share. The company will offer 10 million shares to the public, 4 million of which are going to be newly issued from Grid Dynamics and 6 million of which are coming from existing Grid Dynamics shareholders.
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The company said it will not receive any proceeds from the sale of shares from the 6 million shares being sold by current stockholders. This means the only part of this common stock offering that is raising money for Grid Dynamics is the 4 million being offered by the company itself. At the offering price of $15.03, this will raise around $60 million for the company and boost its shares outstanding from 54 million to 58 million.
Now what
It is strange that Grid Dynamics stock popped on this news. Typically, common stock offerings cause share prices to drop since they dilute existing shareholders. However, in this case, Grid Dynamics stock is actually trading above the offering price, at around $17.50 as of this writing. For example, yesterday, Realty Income stock dipped when the company announced a common stock offering, which is what normally happens when companies dilute existing shareholders.
With plenty of cash on its balance sheet and a business that is cash flow positive, it's possible Grid Dynamics is raising these funds to make an acquisition, something the company has done in the past. In the past year, the company has acquired Netherlands-based consulting company Daxx and recently acquired U.K. consulting company Tacit Knowledge. Investors in the company shouldn't be surprised if management announces another acquisition in the coming months.
