American Coastal Insurance stock may not be ready for springtime, but this weekend can't come soon enough. It took quite a beating on the exchange, closing up more than 17% lower. Investors were furious after news of a new, relatively large share issue. The steep drop did not mirror the performance of the S&P 500 index, which landed 0.6% in positive territory in the first half of the day.
American Coastal said yesterday that it plans to issue up to 8 million shares of its common stock in an at-the-market public offering. ATM issues often take place in a piecemeal fashion, with share sales taking place from time to time, rather than all at once.
The insurer is selling the stock through a distribution agreement with Raymond James Financial. Raymond James, a partner in the company, will receive a commission of up to 3% of the gross proceeds derived from the issue.
The company did not give an estimate as to how much it might earn in revenue as a result of its ATM offering, as this is an ATM offering that can be difficult to gauge due to uncertainties about the totality of the issue and its timing.
American Coastal's total shareholders are eight million, a significant number, as it currently has just over 43.4 million shares outstanding. Even if it floats only 50 percent of the mentioned amount, the issue risks being very dilutive to existing stockholders, which explains their rather negative reaction to the news.