Birkenstock Holding (NYSE:BIRK) shares dropped 2.5% in pre-market trading after the footwear company announced a secondary offering involving 22.5 million shares priced below the stock’s previous market close.
The shares are being sold by BK LC Lux MidCo S.à r.l., an entity affiliated with L Catterton, with the offering price representing a 4.02% discount to Birkenstock’s prior closing price.
The discounted transaction has put pressure on the stock as investors assess the additional volume of shares being brought to market by one of the company’s major shareholders.
L Catterton affiliate reduces Birkenstock stake
The secondary offering will allow BK LC Lux MidCo S.à r.l. to dispose of a significant portion of its investment in Birkenstock.
Because the transaction involves shares already held by the selling shareholder rather than newly issued stock, Birkenstock will not receive any of the proceeds from the sale.
The offering therefore does not directly raise fresh capital for the company and is instead primarily a liquidity event for the existing investor.
JPMorgan manages share offering
JPMorgan is acting as underwriter for the transaction, which is expected to close on August 17.
The underwriter has also been granted an option to purchase as many as 3.83 million additional shares.
If that option is fully exercised, the total number of shares sold through the transaction would rise substantially above the initial 22.5 million-share offering.
The size of the deal is notable relative to the number of Birkenstock shares currently available for public trading.
Offering adds substantial shares to market
Birkenstock had approximately 183.9 million shares outstanding as of March 31, while its public float stood at around 55.7 million shares.
Against that backdrop, the 22.5 million shares included in the initial offering represent a sizeable amount relative to the existing float.
The potential sale of an additional 3.83 million shares through the underwriter option could further increase the volume reaching the market.
Large secondary offerings can temporarily weigh on share prices because investors must absorb increased supply, particularly when the transaction is priced at a discount.
Birkenstock receives no proceeds
The offering does not alter Birkenstock’s finances directly because all shares are being sold by the existing shareholder.
Instead, the immediate market focus is on the reduction in L Catterton’s affiliated holding and the increased availability of Birkenstock shares to public investors.
The combination of the sizeable offering and its 4.02% discount to the previous close contributed to the 2.5% decline in Birkenstock shares before the opening bell.