Discover to sell $500 million in stock


It says something about the market's generally improving impression of financial stocks. Discover Financial Services (DFS) will sell $500 million in shares. The disclosure about what the company will do with the money is typically vague. Underwriters will get a 30-day option to sell additional shares of up to 15 percent of the original offering to cover over-allotments.

Discover has not priced the shares yet, but its stock fell almost 10 percent after hours to $9.50. Discover has a market cap of $5.1 billion, so the drop is what should have been expected.

The unfortunate thing for shareholders is that many financial companies are raising capital whether they need it or not. Share prices have risen significantly across the sector since their March lows. In exchange for a little dry powder, stockholders get a bunch of dilution.

Douglas A. McIntyre is an editor at 24/7 Wall St.