Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Speed Commerce (NASDAQOTH:SPDC) initially fell by nearly 23% early Tuesday, and then recovered partially to close down 9% after the company announced it has closed a private offering with institutional investors.
So what: For an aggregate purchase price of $10 million, Speed Commerce sold 3,333,333 shares of Series C preferred stock, as well as five-year warrants to purchase up to 833,333 shares of common stock at $3 per share. What's more, the Series C preferred stock will accrue cumulative dividends at an annual rate of 7%. Those dividends will be payable in cash or, at Speed Commerce's option during the first year, additional preferred shares.
Speed Commerce says the net proceeds from the offering will "be used to pay down indebtedness and for general corporate purposes."
Now what: As Speed Commerce transitions its business to a "pure-play e-commerce services provider," it needed the funds considering it had just $53,000 in cash and nearly $31 million in debt on its revolving credit line as of the end of last quarter. Shares also don't look particularly cheap trading trading around 19 times next year's expected earnings. In the end, whether Speed Commerce's efforts pan out, I can't blame the market for taking a step back given today's costly, dilutive move.