Existing shareholders usually look unfavorably on a secondary stock offering such as this one. After all, shares owned by a company are no different from those held by individuals. They are an asset, and the willingnes of a company to sell implies that current valuations support selling some of these assets off.
If a company can convince shareholders that they need to sell shares to raise capital for much needed projects, then that usually goes over well. If a company is selling to pocket profits, then what does that say about the current price??
Also, there are many ways to raise capital without giving away ownership (shares) of one's company. Lines of credit with banks and bond offerings are the most common. If a company decides to sell stock, it may imply that it feels it is getting a very good price for its stock (i.e. overvalued price)
On the bright side, I think it is very encouraging that Bear Stearns is the lead underwriter. An underwriter won't sign up unless they think they can easily sell all these shares at the offering price. Thus, Bear must believe that the demand for these new shares will be there. Plus, a major like Bear Stearns never deals with small fry companies. I agree with others that the publicity generated by a major like Bear Stearns will be very good.
It will be very interesting to see what the offering price is. If the price is, say $28, then you know that will put a cap on MRVC's price. There is no way that MRVC can advance to $32 when people can just wait and pick up shares at $28. (Please correct me if these concepts are wrong)
If I were to guess, MRVC may come under some short term selling pressure. The publicity gained from Bear Stearns will greatly outweigh this short term pressure, however, and the net gain will be very positive for MRVC in the intermediate to long term.
<< Dan S. wrote:
..may I buy back those few shares I sold yesterday at 30 1/2? I'm not sure how this can be taken as bad news...comments? >> |
