Shares of Hain Celestial (HAIN 2.91%) tumbled over 11% in morning trading Thursday after the organic tea and food company announced a secondary offering for 12.4 million shares. As of 12:38 p.m. EST, shares were down 10.6%.
Because Hain investor Engaged Capital would be selling the stock and the tea company was not issuing new shares, Hain would not receive any of the proceeds from the transaction. But with the expected price to be between $45.50 and $46.50 per share, the pricing at the midpoint was only about 4% below where the stock closed yesterday and the market reacted badly to the announcement.
The stock sales represents about 12% of Hain's 99 million shares outstanding, and the organic food and beverage stock said it would also buy back about 1.7 million directly from Engaged. When all is said and done, the private equity firm will still own over 1.9 million shares. The founder of Engaged Capital is also a Hain director.
The tea and food specialist said it plans to finance the repurchase by tapping its revolving credit facility.
The stock announcements overshadowed what otherwise could have been a good day for Hain Celestial as Maxim Group analyst Anthony Vendetti reiterated his buy rating and raised his target price from $52 a share to $63 a share.
The Fly reports Vendetti told investors that Hain did better than expected in its recent earnings report and was making the right moves when it came to offsetting the impact of inflation and supply chain disruptions. Hain was raising list prices on all its brands, finding alternative suppliers, and reducing the number of shipments it needed to make by consolidating orders.
Whether Vendetti maintains his new price target remains to be seen, but it now represents nearly 50% upside from where Hain's stock is currently trading.