Smithfield Foods Inc. (NASDAQ:SFD) saw its stock drop 5.2% on Wednesday following the announcement that its largest shareholder is conducting a secondary public offering of 16 million shares of the company’s common stock.
The American food producer, known for its value-added packaged meats and fresh pork products, will not receive proceeds from the sale, as the shares are being sold by SFDS UK Holdings Limited, Smithfield’s principal shareholder.
Alongside the offering, the selling shareholder is granting underwriters a 30-day option to purchase up to 2.4 million additional shares at the public offering price, minus underwriting discounts and commissions.
Morgan Stanley, BofA Securities, and Barclays have been named joint lead book-running managers for the transaction.
Large secondary offerings are often perceived by investors as potentially dilutive to share value, even when the company itself is not issuing new shares. In this case, the substantial size of the block being sold appears to be contributing to the negative market response.
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