I have been covering MeetMe (NASDAQ:MEET) for quite a while. You may remember that I bought in at the $2 mark, and made it my top pick for 2016. In the summer of 2016, the stock surpassed $7, at which point I recommended that investors should take profits. When the stock fell back under $5, I called for another buy. Then, after hitting a homerun, the stock exploded to $6 this week as the company delivered on all metrics I was looking for in its Q4. Today however the stock is cratering. Why?
Well the positive news from the quarter is all but forgotten right now. One very bullish piece of news out of the report was that the company was going to buy a company known as if(we). The reason however that this positive news is now punishing the stock is that the company just announced it would conduct a share offering to help raise the money. I am actually surprised at the price point.
MeetMe is doing an underwritten public offering of 8,000,000 shares of its common stock at a public offering price of $5.00 per share. Just $5.00 per share. This was a 16% discount to where shares were trading before the announcement. The company effectively by proceeding with this price point shaved 16% of its market cap with a single press release. Now I get it. They need to ensure there are buyers so that way there is maximum cash raised. At this discount it is assured. MeetMe has also granted the underwriters a 30-day option to purchase up to an additional 1,200,000 shares of common stock to cover over allotments, if any. The offering is expected to close on or about March 15, 2017. In addition to funding the purchase MeetMe intends to use the net proceeds from the offering for general corporate purposes, and other potential future acquisitions.
This is a real hit to shareholders, especially those who bought the momentum this week. The fact is that………READ MORE