Key Points
The base share count of the issue was upsized from 15 million to 20 million.
Yet it'll still retain its majority position in the retailer.
The stock of thrift store chain operator Savers Value Village (NYSE: SVV) has landed in the discount bin.
The retailer announced a secondary stock issue at a relatively bargain price, which dampened investor sentiment on the company. Its stock was down by more than 11% week to date as of Thursday evening, according to data compiled by S&P Global Market Intelligence.
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Reduction of the majority stake
Savers initially announced the sale after market close on Monday. It wrote that affiliates of the company's majority stockholder, alternative investment company Ares Management, were unloading 15 million shares of its common stock for $10.25 apiece in a public offering.
Image source: Getty Images.
The sale was soon upsized to 20 million shares, with the issue's underwriters granted an option to collectively sell an additional 3 million.
Savers stressed that it would earn no proceeds from the sale, as it wasn't part of the selling syndicate. In fact, it bought just over 1 million shares from the underwriters' allotment.
Neither Savers nor Ares provided a reason for the latter's share divestment. It won't change Ares' ownership position, as the company will continue to hold a majority after the offering is completed.
Exit velocity
I feel Ares is doing what companies like it always try to do -- exiting an investment at an opportune and suitable time. The company first bought into Savers in 2019, and it's likely time to produce some financial returns from this. I doubt this is a panic sale.
That $10.25-per-share price was well below the $12.29 level at which the stock closed just before the announcement of the issue. Also, the sale of 23 million shares at once had quite an impact, given that the total shares outstanding tally was a bit over 154 million.
Since Ares likely isn't making a desperation move here, I'd consider this as an opportunity to -- appropriately -- own Savers stock at a discount. The company increased its net sales by over 7% in its recently reported second quarter and its headline net income by 14%, so its fundamentals look rather healthy.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Savers Value Village. The Motley Fool has a disclosure policy.