Why Jones Energy Inc's Shares Plunged 13% Today

A big share sale isn't making investors happy today.

Travis Hoium
Travis Hoium
May 14, 2015 at 11:08AM
Energy, Materials, and Utilities

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 Jones Energy Inc (NYSE:JONE) dropped as much as 13% today after its largest shareholder announced it was selling shares.

So what: After the market closed yesterday, Metalmark Capital, LLC announced the launch of a 5 million share sale with an underwriter option to purchase another 750,000 shares. This morning it was announced that shares would be priced at $10.00 per share, accounting for nearly all of the drop in shares today.  

It's worth noting that Metalmark is selling about 22% of its stake in Jones Energy and none of the proceeds will go to the company.  

Now what: It's never a good thing when your largest shareholder sells a big chunk of shares and with Metalmark's involvement in the company this is especially worrying. The private equity firm essentially built Jones Energy into the firm it is today through a number of acquisitions and took it public in 2013. So, if the people who know the most about Jones Energy are selling, I don't see a reason investors should have a lot of confidence in the stock's recovery right now.