NEW YORK (AP) — Shares of AK Steel Holding Corp. tumbled close to a nine-year low Thursday, after the company priced an offering of its stock.
THE SPARK: The West Chester, Ohio-based steel producer said late Wednesday that it would sell 22 million shares for $4 each. The price represents a discount of less than 1 percent from the company's Wednesday closing share price of $4.02 per share.
THE BIG PICTURE: Investors generally don't like stock offerings, because they dilute the value of their existing stakes. AK Steel currently has about 110.6 million shares outstanding.
In connection with the offering, AK Steel granted the offering's underwriters a 30-day option to buy up to an additional 3.3 million shares.
The company plans to use the proceeds from the sale to repay debt under its asset-backed revolving credit facility and for general corporate purposes. The offering is expected to close on Tuesday.
The news follows the company's Tuesday announcement that it will book a bigger-than-expected loss for the fourth quarter due to lower steel prices and a large income tax charge.
In addition Standard & Poor's Ratings Services and Moody's Investors Service this week cut their ratings of the company, citing tough steel market conditions.
THE SHARES: Down 36 cents, or 8.8 percent, to $3.67 in very heavy midday trading, after dropping as low as $3.60 earlier in the session to their lowest price since December 2003.
Since the beginning of the year, AK Steel shares have lost about 51 percent of their value.