Shares of Westport Fuel Systems (NASDAQ:WPRT) were down 10.7% in June, according to data from S&P Global Market Intelligence, following its decision to have yet another stock offering to kick off the month.
The natural gas fuel technology company announced its intention to sell 18.2 million shares at $5.50 per share, with up to 15% more shares available for the underwriters, for a total of around 21 million shares worth around $100 million.
As Westport stock had ended the month of May at $6.26 per share, the stock offering represented a 12% discount to what it had been trading at prior to the offering announcement. And because it was a marketed offering, which means the underwriters don’t set a price for the stock until they find buyers for all the shares, it suggests the market for Westport stock may be weak.
Further, with 147 million shares already outstanding, the offering represented dilution of existing Westport Fuel Systems shareholders of over 14%.
Westport said it’s going to use the proceeds of the offering to finance capital expenditures related to its high pressure direct injection (HPDI) products while also funding research and development in decarbonization of hydrogen fuel. Whatever funds would be left over would be earmarked for making bolt-on acquisitions, or the purchase of smaller, but strategically aligned companies.
Westport Fuel Systems share count has steadily risen over the years, sometimes by significant quantities, and though it has some valuable partnerships, such as with engine maker Cummins, it has been burning through cash and earlier this year teased a $400 million shelf registration. That means there could be further dilution in the cards over the next two years for shareholders of this natural gas fuel tech stock.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Need Your Help Today. Your $1 can change life.