FAMI Stock: Why Farmmi Stock Is Falling So Hard Today

Farmmi (NASDAQ:FAMI) stock is falling hard on Monday after the agricultural products company announced an underwritten public offering.

a tractor cultivating a farm from an aerial view representing FAMI Stock.

Source: Shutterstock

According to a press release, Farmmi plans to raise $81 million through the underwritten public offering by selling shares of its stock and warrants to purchase shares of its stock. This will have it offering 368,261,717 shares as well as warrants that will be priced the same.

Let’s talk about that price, which is what has investors unhappy with FAMI stock today. The company’s underwritten public offering prices its shares at 22 cents each. To understand why that has investors so upset, all we have to do is look at the stock’s previous closing price of 58 cents per share.

The price of stocks typically falls with underwritten public offerings as they are often priced lower than the stock’s current trading value. In the case of FAMI stock, this is even worse as the offering price is less than half of its previous closing price.

Of course, investors did know that the public offering was coming. The company announced as much on Thursday. That resulted in shares climbing over the next couple of days. However, that positive movement couldn’t continue after the price of the offering was revealed today.

To go along with today’s fall in price comes heavy trading of FAMI stock. As of this writing, more than 164 million shares of the stock have changed hands. To put that in perspective, the company’s daily average trading volume is only about 14.2 million shares.

FAMI stock was down 50.1% as of Monday morning.

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On the date of publication, William White did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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