Cobalt Shares Plunged: 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 Cobalt International Energy (NYS: CIE) sank 10% Tuesday after the oil explorer said it would sell 47 million shares of its common stock.

So what: Cobalt's shares have rocketed recently on positive results at its Cameia-1 Angola well, so it's no surprise that management is pouncing on the stock's run-up to raise some capital. Given the significant size of the offering, however, investors have good reason to be concerned about its likely dilutive effects.

Now what: I'd continue to remain on the sidelines. Even with today's double-digit pullback, Cobalt's high-beta shares are still up more than 200% over just the past three months. While Cobalt's prospects in Angola are certainly tantalizing, the stock's still-speculative nature makes it an easy pass for conservative investors.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. 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 Fool's disclosure policy always gets a perfect score.

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