Clearwire Shares Dropped: What You Need to Know
Dec 8th 2011 12:55PM
Updated Dec 8th 2011 1:32PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of wireless broadband provider Clearwire (NAS: CLWR) sank as much as 10% on Thursday after the company announced the details of its secondary stock offering.
So what: The embattled Clearwire said it would sell 175 million Class A common shares at $2 per share, which is about 12% below its Wednesday closing price. When you couple that clear discount with management's decision to also increase the size of the offering by $50 million, it's no surprise that investors are concerned about the deal's likely dilutive effects.
Now what: I wouldn't be so quick to pounce on this plunge. The cash-strapped Clearwire also said that its underwriters have a 30-day option to buy an additional $52.5 million of Class A stock and that its majority owner, Sprint Nextel (NYS: S) , will buy about 172 million shares of its Class B shares. While the cash infusions certainly put Clearwire on firmer financial footing, it might be a while before shareholder value starts growing again.
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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