Why Forterra's Shares Plunged 14.4% on Thursday

What happened 

Shares of Forterra (NASDAQ: FRTA) plunged as much as 14.4% in trading Thursday after announcing the pricing of a stock sale. The stock didn't recover much from lows and was still down 11.8% for the day at 3:40 p.m. EDT. 

So what

The company announced the sale of 10 million shares of Forterra stock at a price of $13.50 per share, below yesterday's closing price of $14.61 per share. This is notable because the offering didn't go to Forterra itself, but was rather a sale by the company's largest shareholder, Lone Star Funds. That sale is what's driving the initial slump in the stock, but clearly shares fell below that, hitting as low as $12.50 per share today. 

Water pipes and valves in a building.

Image source: Getty Images.

When a big stockholder sells a big portion of stock, investors should take notice. Maybe their investment thesis changed or they need to raise cash, but if they're abandoning a stock then investors should reconsider if their thesis has changed as well. 

Now what

This sale doesn't fundamentally change Forterra's operations at all, so investors shouldn't panic sell. But the idea that a large shareholder is selling its stock is notable. It's important to note, however, that the sale happened at nearly four times the price of the stock's 52-week low, so this may just be opportunistic selling for Lone Star Funds. 

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Travis Hoium 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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