Wednesday, September 9, 2009

Ameren Issuing More Stock, Price Drops

Once again, a non-financial company has issued plans for a secondary offering to the detriment of its stock price. Ameren, an electric utility holding company whose main operating subsidiaries are based in Illinois, has announced it will issue another 19 million shares. (With over-allottment rights of 2.85 million, the issance could be as high as 21.85 million.) Since the company plans to use the proceeds to up its investments in its subsidiaries, there's no reason to assume that the offering won't be dilutive. The best face for this offering would be an increase in regulatory capital leading to higher rates being allowed under the regulations.

Ameren's total shares outstanding as of June 30th was 214.2 million. Adding 21.85 million makes for an increase of slightly more than 10% of total shares outstanding. The money is earmarked to be spent, so there's no offset for the dilution factor except for the increase in earnings permitted by the increases in regulatory capital.

Left unspecified were the specific uses to which the funds will be put. Ameren stock dropped when cap-and-trade legislation was churining along, which leads me to suspect that the proceeds will be used to cut down the company's coal consumption by building natural gas generators.

Ameren stock was down 0.70% in regular trading, and down a further 3.12% in after-hours trading. The latter drop may not be reflected in its performance once regular trading starts again.

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