So here's a classic market move: a company announces it's selling more stock, and the existing shares take a little dip. That's what happened to Northern Oil & Gas Inc. (NOG) on Wednesday after the bell.
The company said it's starting a public offering to sell $200 million worth of its common stock. And, as these deals often go, the underwriters get a 30-day option to snap up another $30 million worth if they want. It's like the company is having a stock sale, and the bankers get first dibs on the leftovers.
What's the money for? The usual corporate stuff, plus paying down some debt. Specifically, Northern Oil & Gas plans to use the net proceeds for general corporate purposes and to repay some of what it owes under its revolving credit facility.
Now, if you're wondering why a company might need to raise cash, the balance sheet offers some clues. As of the end of last year, the company reported having roughly $14.3 million in cash and cash equivalents. On the other side of the ledger, it was carrying about $2.40 billion in total long-term debt. Raising $200 million (or potentially $230 million) would give the company a fresh chunk of capital to work with.
Investors reacted by nudging the stock lower. Shares were down 2.03% in after-hours trading, changing hands around $28. It's a typical, if not exactly thrilling, market reaction—new shares on the way often mean a bit of dilution, and the market prices that in pretty quickly.
