Please ensure Javascript is enabled for purposes of website accessibility

Why Hain Celestial Is Tumbling Today

By Rich Duprey – Updated Nov 12, 2021 at 9:43AM

Key Points

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The organic tea company experienced offsetting announcements today, though the bad outweighed the good.

What happened

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. 

Pen tracing a stock's movement down.

Image source: Getty Images.

So what

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. 

Now what

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.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.