What: Shares of Amplify Snack Brands, Inc. (NYSE:BETR) surged higher today after the company priced its secondary offering of 10 million shares at $11.25 last night. The stock finished today's session up 13.3% at $13.62.
So what: The rally was an odd one, as secondary stock offerings don't usually push the stock higher. In fact, it's more common for the stock to fall as a bunch of shares get dumped on the market, especially at a lower price. In this instance, the stock isn't being diluted, since existing shareholders are selling, including company directors, but that still doesn't offer a direct impetus for the rally.
Notably, the stock fell initially, after management announced the pricing, sliding closer to the offer price last night, but then it began to pick up in pre-market trading this morning. The most likely cause may be a short squeeze, as 22% of the SkinnyPop parent's shares are sold short, and an event like this could send shorts in to cover their bets. Today's trading volume was nearly 10 times its average level, a sign that a squeeze could have resulted.
Now what: Before the company announced the secondary offering earlier in the week, shares were trading at $13, so most of today's gains served only to recoup those losses. For the long-term shareholder, today's action has little bearing on the company, since its fundamentals remain the same. Better off focusing on the better-for-you snack maker's ability to grow as it seeks acquisitions like Paqui, which it snatched up last month.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.