Monday wasn't a beautiful trading day for Revlon (REV) stock. The storied cosmetics and personal-care products maker suffered a modest decline in share price against the nearly 0.6% gain of the S&P 500 index after it announced its latest capital-raising move.
That morning, Revlon disclosed that it's floating an at-the-market secondary issue of its class A common stock of up to $25 million. Sales of these new shares will be conducted from time to time. The company didn't get more specific.
It did say that it will utilize its share of the proceeds "for general corporate purposes, which may include additions to working capital, capital expenditures, repayment of debt, the financing of possible
acquisitions and investments or stock repurchases."
In line with the current challenges pressuring many global companies, Revlon added that it might use some of these monies to mitigate the supply-chain disruptions it's experiencing.
It's typically an indication of financial weakness when a company taps the market for more capital. Although Revlon has been doing better of late, it remains saddled with a huge amount of debt -- nearly $3.4 billion in long-term borrowings at the end of last year, against annual revenue of barely over $2 billion.
If the company must raise capital, at least its latest effort won't add to the debt pile. It will, of course, dilute existing shareholders, which is likely the reason for the negative investor reaction on Monday.
But there have certainly been worse dilutions. At the moment, the company's market cap is approaching $343 million.