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Investing.com -- Atlas (NYSE:ATCO) Energy Solutions Inc. (NYSE:AESI) shares tumbled 8% following the announcement of an upsized underwritten public offering of common stock at a price lower than the recent close. The energy company's stock closed at $25 on Thursday, but the new offering is priced at $23 per share, which has prompted the market to react negatively.
The offering includes 11,500,000 shares, aiming to raise total gross proceeds of $264.5 million. The company also granted underwriters an option to purchase up to an additional 1,725,000 shares within 30 days under the same terms. Atlas Energy has outlined that the proceeds from the offering will be used to repay debt, including a portion of its secured PIK toggle seller note and outstanding borrowings under its credit and term loan facilities. Additionally, funds will be allocated to the cash consideration for the acquisition of Moser Engine Service, Inc., and any remaining funds will be used for general corporate purposes and growth capital expenditures following the completion of the acquisition.
The offering is expected to close on February 3, 2025, subject to customary closing conditions. The acquisition of Moser Energy Systems is anticipated to be completed in the first quarter of 2025, pending customary closing conditions and regulatory approvals.
Goldman Sachs & Co (NYSE:GS). LLC and Piper Sandler & Co. are leading the offering as book-running managers, with several other financial institutions serving as managers and co-managers.
Investors may be concerned about the potential dilution of shares due to the offering, especially since the offering price is lower than the stock's recent closing price. The decision to raise capital through a public offering is often a balancing act for companies, as it provides necessary funds for growth and debt repayment but can also lead to a short-term negative impact on the stock price due to dilution concerns.
Atlas Energy's strategic move to fund its acquisition and repay debt showcases the company's efforts to strengthen its financial position and invest in growth opportunities. However, the market's immediate response reflects the sensitivity of stock prices to dilution and the terms of capital raises.
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