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What: Shares of offshore driller Hercules Offshore
So what: Wells Fargo was behind the drop in Hercules' shares today, as the bank downgraded the stock to underperform from market perform. In a research note, the bank suggested that the tough times the company has faced have done enough damage to its balance sheet that it will need to offer a lot of shares in the next year or so. A big issue would dilute current shareholders, and -- according to Wells Fargo -- push the share price down below $2.50.
Now what: The situation at Hercules seems to be a race against time to see whether the business can recover fast enough to keep the company's balance sheet out of serious trouble. Wells Fargo's pessimism or not, investors already had a pretty dour outlook for the stock: It trades at a tangible book value multiple of just 0.4. For that reason, bargain hunters may find themselves drawn to the stock, but they will definitely want to take Wells Fargo's warning into consideration.
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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his Motley Fool CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.