Few investors wanted to experience ownership Main laboratories (NYSE:CLB) stock on Thursday. This is because the oil tank service company is looking for new financing, and these investors are not happy about it. As a result, Core Labs stock closed just over 10% lower on the day.
Core Labs announced on Thursday that it has launched an equity offering on the market (ATM). Under this initiative, the company will sell up to $60 million of its ordinary actions to the public. It will be assisted in this effort by Wells Fargo and Bank of America Securities, both of which must operate under a stock distribution agreement with the company.
In discussing the use of its share of proceeds, Core Labs used the standard language typical of equity issuers citing “broad corporate objectives.” He added that these could include product/technology development, debt repayment and possible acquisitions.
According to data compiled by Yahoo! Finance, the specialty oil services company currently has just over 46.3 million shares outstanding. At the current share price, that $60 million is about 2.2 million shares.
2.2 million shares added to a bucket of over 46 million isn’t particularly dilutive, so on that basis alone, investors seem to be overreacting to Core Labs news.
But if we zoom out a bit on the company, we can see that there is some concern about how quickly it business will grow in the short and medium term. Investors could also worry about an upcoming decline in the current high oil price, a dynamic that does not favor a reservoir service provider like Core Labs.
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