Why Allied Nevada Gold's Shares Dropped

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 Allied Nevada Gold dropped 10% today after announcing a share sale.

So what: The company is selling 14 million shares to underwriters for $10.75 per share in a bought deal equity financing. The underwriters will have the option to purchase another 2.1 million shares if demand exists for the shares in the market.

Now what: In deals like this it's common for the stock to be pushed down to around the sale price, which is exactly what happened today. A share offering like this is dilutive to existing shareholders but it could be worth it if capital expenditures at Hycroft Mine, where most of the funds will be used, pays off. I wouldn't be a buyer simply based on the offering today and this it will keep shares down around $10.75 per share for the short-term.

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The article Why Allied Nevada Gold's Shares Dropped originally appeared on Fool.com.

Motley Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks 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 Motley Fool has a disclosure policy.

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