Mere days after delivering a market-pleasing quarterly earnings report, Camping World Holdings (NYSE: CWH) posted news that wiped smiles off many investor faces. The company is floating a somewhat complicated new stock issue priced quite modestly, and this drove the stock's price down by almost 12% on Thursday. That was a far steeper drop than the 1.9% slip of the S&P 500 index.
Nearly 15 million new shares on sale
After market close on Wednesday, Camping World announced the secondary share issue and set a price for the flotation. The outdoor goods retailer is offering just over 14.6 million shares of its class A common stock to the public at a price of $20.50 apiece. That's more than $3 per share lower than the stock's price on Wednesday, the day after those quarterly earnings figures were published.
As usual with such financing moves, Camping World has granted the issue's underwriters a 30-day option to purchase additional stock. That syndicate, led by Goldman Sachs and JPMorgan Chase, will be able to collectively buy up to almost 2.2 million shares.
Camping World said that it would use the proceeds to acquire more than 14.6 million common units from its subsidiary CWGS Enterprises. In turn, CWGS will use its proceeds for general corporate purposes, aiding Camping World. These include working capital and debt retirement.
The company expects that the issue will close Friday, Nov. 1.
A wary market
Typically, a company raising fresh equity will do so directly; in this instance, Camping World is doing so through a little financial engineering that involves a subsidiary. This is clearly, and understandably, making investors wary, and the relatively lowball price only adds to that feeling.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and JPMorgan Chase. The Motley Fool recommends Camping World. The Motley Fool has a disclosure policy.
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