Investing.com – Sun Country Airlines stock (NASDAQ:SNCY) plunged 8% Wednesday as the company said one of some of its existing backers will sell 8 million shares or around 14% of the company’s equity.
At the current price of $31.60, the offering will fetch the sellers around $253 million.
The underwriters will have a 30-day option to purchase up to an additional 1.2 million shares of the company from the sellers.
If that happens, the total size will comprise 16% of the company’s outstanding equity and help the sellers raise around $291 million from the sale.
Sun Country Airlines is not selling any shares and will not receive any proceeds from the proposed offering, the company said in a note.
Such a large sale of a company’s shares tends to depress prices in the short-term as equity goes out from one hand to generally more than one.
It may not be true but a large cashing out of an existing shareholder also tends to convey a sign of under-confidence in the company’s ongoing operations and management. Of course, investors cash out when their expected rate of return on the investment has been made and when they have to return cash to their own shareholders.