Why Applied Optoelectronics Stock Dived by Almost 14% on Monday
Key Points
It's aiming to reap as much as $600 million.
This isn't its first time at this particular rodeo, however.
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The latest in a series of capital-raising efforts by Applied Optoelectronics (NASDAQ: AAOI) wasn't greeted warmly by shareholders on Monday. On news that the networking hardware specialist is seeking as much as $600 million in upcoming share sales, many sold their stock. It closed the trading day nearly 14% lower.
Hat in hand
In a regulatory filing late Friday afternoon, Applied disclosed that it has engaged Raymond James and Needham as sales agents to sell up to that amount of its common stock. The sales will be effected by at-the-market (ATM) offerings to the public.
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$600 million isn't particularly dilutive to Applied, whose market cap now stands at more than $9.1 billion.
However, the company has already gone to the investor well this year for new financing; in February, it announced a $250 million ATM facility with the same two sales agents. Thanks to rapid and eager take-up, this was soon upsized to $500 million.
Too much, too soon?
That habit is concerning to investors, since an equity flotation here and there doesn't pose much dilution risk, but repeated ones do. Market players are also probably skittish about the company reaching its full allotment, as occurred with that original $250 million goal in February.
I'm not sure I'd be as discouraged by all this as investors seemed to be on Monday. Applied is a highly specialized manufacturer of goods being used in the feverish (and sustained) build-out of artificial intelligence (AI) compute, so the more it can shore up its capital base, the better. Hopefully, the funds raised will be money well spent. We should watch that share count, though.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
