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 specialty hydrocarbon and fuel products company Calumet Specialty Products Partners, L.P. (NASDAQ:CLMT) fell as much as 11% today after announcing a stock offering.
So what: Calumet will offer 6 million shares of stock at $26.75 per share, plus an option for underwriters to purchase another 900,000 shares for overallotment. The release announcing the offering said the company will use the funds to reduce its revolving credit line and potentially buy back outstanding notes.
Now what: After reporting a fourth quarter that resulted in a $63.5 million loss and ended with just $8.5 million in cash on hand the company was in need of liquidity. Ironically, management touted its ability to generate cash and access capital markets in order to fund operations and its $0.685 quarterly payout to investors.
The current stock offering is like taking money from one pocket and putting it in the other, except investment bankers get a huge fee in the process. Given the continued losses, poor cash position, and weakness in the energy market, I don't think this is a discount investors should be buying today.