What Happened?
Shares of industrial components supplier NN (NASDAQ: NNBR) fell 13.9% in the afternoon session after the company announced it raised $75 million through a private placement of common stock.
The company entered into an agreement with institutional investors to sell 24,509,804 shares at $3.06 per share. This type of stock sale increases the total number of shares outstanding, which dilutes the value and ownership stake of existing shareholders.
The stock's price often falls in response to such an announcement as the market adjusts to the increased supply of shares and the price at which they were offered to the new investors.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy NN? Access our full analysis report here, it’s free.
What Is The Market Telling Us
NN’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. But moves this big are rare even for NN and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 4.7% on the news that the company announced it entered into an agreement for a private investment that is expected to generate $75 million in gross proceeds.
The financing deal involves issuing 24,509,804 shares of common stock at a price of $3.06 per share.
This type of transaction, known as a private investment in public equity (PIPE), allows the company to raise capital by selling shares directly to a select group of investors. The influx of cash is typically viewed positively by the market as it strengthens the company's financial position. The deal is expected to close subject to customary closing conditions.
NN is up 160% since the beginning of the year, and at $3.49 per share, it has set a new 52-week high. Despite the year-to-date gain, investors who bought $1,000 worth of NN’s shares 5 years ago would now be looking at only $477.40.
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