Mellanox Technologies Shares Got Crushed: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of semiconductor company Mellanox Technologies (NAS: MLNX) fell 10% today on word of a share offering.
So what: Mellanox plans to issue up to 3.5 million shares, which would increase share count by 9.7%. The company said it would use the funds from the share offering for "general corporate purposes, including working capital and potential strategic investments."
Now what: Shares often fall on word of an offering, but in this case the market is assuming there's virtually no benefit to the offering. Since details are scant on how working capital or possible investments would work, it's hard to quantify a benefit, but I think the move is a little overdone today. I'm not terribly excited about Mellanox's value, trading at 20 times forward earnings, but if this offering leads to more growth, then it could end up being a good long-term move.
Interested in more info on Mellanox Technologies? Add it to your watchlist byclicking here.
At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.