Brookdale Senior Living’s recent announced that it began a public offering of 2.5 million tangible equity units, with an aggregate stated amount of $125 million, is fueling concerns among some investors, according to Benzinga.
The Brentwood, TN-based company has seen its shares fall 36% so far this year, The Motley Fool reported. The situation worsened after Wednesday’s announcement, according to the outlet. The stock closed last Tuesday at $4.92, then opened on Wednesday $4.25. It fell to a 52-week low of $3.27 late in the afternoon before closing the day at $3.29.
The net proceeds from the $125 million offering will be used for general corporate purposes, according to the firm. Each tangible equity unit will have a stated amount of $50 and be comprised of a prepaid stock purchase contract and a senior amortizing note due November 2025, each issued by Brookdale. Brookdale intends to grant the underwriters of the offering a 30-day option to purchase up to an additional 375,000 tangible equity units.
“The offering is dilutive to current investors, effectively reducing the value of their shares,” Kevin Vandenboss wrote for Benzinga. Investors wonder if it is time to buy or run from Brookdale investments, according to Benzinga’s real estate writer.
Brookdale properties have seen 11 consecutive months of occupancy growth, and the company announced last month has substantially reduced all 2023 debt maturities with $220 million in refinancing. Still, rumors persist that the company may be shopping for a buyer. A Brookdale representative previously told McKnight’s Senior Living that company executives do not comment on “market rumors or speculation.” The company reported increased revenue but a net income loss in the third quarter.
The offering of tangible equity units “may also signal deeper financial difficulties for the company, which already has a relatively high (7.76) debt-to-equity ratio,” The Motley Fool’s Jim Halley wrote.
In the third quarter, according to Halley, Brookdale reported revenue of $775.5 million, up 18% year over year, but with a net income loss of $28.4 million, or an earnings per share loss of $0.15, compared with net income of $174.3 million in the same period a year ago, or $0.89 in earnings per share.
BofA Securities and Barclays Capital are acting as joint book-running managers for the tangible equity unit offering for Brookdale, which operates or manages 672 senior living communities in 41 states.
Brookdale declined requests for comment in time for the publication deadline.
