What happened
The private equity firm that once owned Hillman Solutions (HLMN 1.15%) is selling down its stake in the home improvement equipment manufacturer. The sale is putting pressure on the stock, pushing shares 4.5% lower as of 1:47 p.m. ET.
So what
Hillman makes a range of fasteners, keys, signs, and other equipment sold at Walmart, Home Depot, and Lowe's. The company was taken private in 2014 by private equity firm CCMP Capital Advisors and returned to public markets in 2021 via a merger with a special purpose acquisition company (SPAC).
CCMP remained the largest shareholder after the SPAC deal, and as is typical with private equity firms, the investor is now slowly monetizing its remaining stake. On Tuesday, Hillman announced the sale of 25 million shares currently owned by CCMP at a price of $8 apiece.
These sales almost always put near-term pressure on the stock, and Hillman shares are no exception. The sale means more stock is available to be bought and sold, and the sales are typically done at a discount to the trading price.
Hillman shares fell by as much as 11% on the news, but have since recovered somewhat. Even with the decline, the stock is still above the $8 CCMP sale price.
NASDAQ: HLMN
Key Data Points
Now what
Investors should be aware there are likely to be future days like today up ahead. The sale reduced CCMP's stake in Hillman by about half, but the private equity firm still owns about 13% of the company's shares, according to a regulatory filing, and will likely continue to sell in the months to come.
The good news is the sales say more about the private equity business model -- to make (hopefully) successful investments and then move on -- than they do about the underlying strength of Hillman. And the impact from these sales tends to be short-lived.
Hillman shares are down about 30% since last summer, with concerns about the housing and home improvement markets weighing on the stock. But the company did report better-than-expected results for the fourth quarter, and it appears to be weathering the housing cycle well. For those who believe in the long-term outlook for this business, any CCMP sale-related decline could be viewed as a buying opportunity.
