Why Is Imperial Petroleum (IMPP) Stock Down Today?

The shares of ship operator Imperial Petroleum (NASDAQ:IMPP) are tumbling 40% in morning trading after the company stated that it would issue 37.5 million shares of its stock. In conjunction with the offering, Imperial will also issue 37.5 million warrants. Each warrant will enable its owner to acquire one share of IMPP stock.

miniature oil barrel and oil well figures on top of stack of money
Source: Shutterstock

Each share of stock, and each warrant will be combined into a single unit. These units will initially cost $1.60, the company explained in a press release. In some cases, a “prefunded warrant” will be included in a unit instead of a share of stock.

Why Is IMPP Stock Down Today?

So why is news of the offering dragging down Imperial Petroleum? Well, secondary offerings like the one IMPP announced typically spook existing shareholders. Companies tend to leverage positive market sentiment to raise more capital. In the process, they dilute these existing shareholders.

In terms of capital, Imperial expects to bring in $60 million from the sale. It will use this funding “for capital expenditures, including acquisitions of additional vessels which we have not yet identified, and for other general corporate purposes.”

Right now also comes at a good time for Imperial in terms of market sentiment. That is because Imperial’s ships transport “gasoline, diesel, fuel oil, and jet fuel,” along with crude oil, for oil exploration companies and others. In the last month to date, amid Russia’s ongoing invasion of Ukraine, the shares had soared over 380%. Now it seems Imperial wants to build on these gains and grow its fleet through a secondary offering.

At Friday’s close, the market capitalization of IMPP stock  was slightly over $50 million.

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On the date of publication, Larry Ramer 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.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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