What happened
Few investors wanted to experiment with owning Core Laboratories (CLB) stock on Thursday. That's because the oil reservoir services company is digging for new financing, and those investors aren't happy about this. As a result, Core Labs' stock closed a bit more than 10% lower on the day.
So what
Core Labs said Thursday that it had launched an at-the-market (ATM) stock offering. Under this initiative, the company will sell up to $60 million worth of its common stock to the public. It will be aided in this effort by Wells Fargo and Bank of America Securities, both of which are to operate under an equity distribution agreement with the company.
In discussing the utilization of its share of the proceeds, Core Labs used the typical stock-issuer boilerplate language citing "general corporate purposes." It added that these could include product/technology development, debt retirement, and possible acquisitions.
According to data compiled by Yahoo! Finance, the specialty oil services company currently has slightly over 46.3 million shares outstanding. At the current stock price, that $60 million shakes out to roughly 2.2 million shares.
Now what
2.2 million shares being added to a bucket of more than 46 million isn't particularly dilutive, so on that basis alone, investors seem to be over-reacting to Core Labs' news.
But if we zoom out a bit on the company, we can see that there is some concern about how quickly its business is going to develop in the short to mid term. Investors also might be worried about a coming decline in the current high oil price, a dynamic that doesn't favor a reservoir services provider like Core Labs.
