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Why Shares of Amplify Snack Brands, Inc. Popped Today

By Jeremy Bowman - May 20, 2016 at 4:51PM

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The better-for-you snack make jumped on a secondary stock offering. Here's what you need to know.

What: Shares of Amplify Snack Brands, Inc. (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.

Image source: SkinnyPop.

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.

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