Core & Main Announces Upsizing of Secondary Offering
- None.
- The company is not offering any shares of Class A common stock and will not receive any proceeds from the offering.
Insights
The upsizing of Core & Main Inc.'s secondary public offering from 15 million shares to 17 million shares indicates a potential increase in liquidity for current shareholders and an opportunity for portfolio diversification for new investors. This move could suggest confidence among the selling stockholders in the market's ability to absorb a larger number of shares without significantly impacting the share price. The additional option for underwriters to purchase up to 2.55 million shares could further stabilize the stock price post-offering by mitigating the immediate oversupply risk.
The repurchase and redemption of shares and partnership interests concurrently with the offering is a strategic financial maneuver that can signal to the market a balanced approach to capital management. By repurchasing shares at the same price as the offering, Core & Main is effectively neutralizing the dilutive effect of the secondary offering on existing shareholders' equity, which could be perceived positively by the market.
Investors should monitor the stock's performance and trading volume around the closing date, as these events can often lead to increased volatility. The involvement of reputable financial institutions like J.P. Morgan and Citigroup as joint lead book-running managers may provide additional confidence to the market in terms of the offering's successful execution.
Secondary offerings are common in the market and are often used by companies to enable early investors or insiders to exit or reduce their holdings. In this case, Core & Main is not offering any new shares itself and will not receive proceeds, which indicates that this is purely a liquidity event for the selling stockholders rather than a capital-raising activity for the company. The market's reaction to such events is typically mixed, depending on the perceived reasons for the selling shareholders' exit and the offering's pricing relative to current market prices.
For potential investors, the upside of such offerings is the opportunity to invest in a company that may not have had shares readily available on the open market, especially if the stock has been tightly held. However, the downside risk includes potential share price depreciation if the market perceives the offering as a signal that insiders are losing confidence in the company's future prospects.
It is also noteworthy that the offering is being conducted via a shelf registration statement, which provides Core & Main with the flexibility to sell shares over time. This method can help manage market impact and indicates a level of preparedness for capital market activities.
Core & Main's use of a shelf registration statement is a strategic legal approach that allows the company to sell securities to the public without the need for a separate registration for each offering. This provides the company with the flexibility to take advantage of market conditions more quickly than if they had to go through the registration process each time. The effectiveness of the shelf registration and the requirement for investors to read the prospectus and other SEC filings underscore the importance of transparency and regulatory compliance in such transactions.
From a legal perspective, the granting of a 30-day option to underwriters to purchase additional shares is a common practice known as a 'greenshoe' option. This provision is designed to stabilize the market price of the stock following the offering by allowing underwriters to cover over-allotments or short positions. It is an important mechanism to consider, as it can affect the supply and demand dynamics of the stock post-offering.
The fact that the closing of the repurchase is subject to the closing of the offering, but not vice versa, is a notable detail. It ensures that the selling stockholders have the certainty of the offering's completion before they commit to the repurchase agreement, which can be a critical point of negotiation in the terms of the deal.
The selling stockholders have granted the underwriters a 30-day option to purchase up to an additional 2.55 million shares of Class A common stock. Core & Main is not offering any shares of Class A common stock in the offering and will not receive any proceeds from the offering. The offering is expected to close on January 10, 2024, subject to customary closing conditions.
As previously announced, concurrent with the completion of the offering, Core & Main expects to repurchase and redeem, as the case may be, from the selling stockholders 3.13 million shares of its Class A common stock and 1.87 million partnership interests of the Company’s subsidiary Core & Main Holdings, LP (together with a corresponding number of shares of Class B common stock of Core & Main) at the same per share price to be paid by the underwriters to the selling stockholders in the offering. The closing of the repurchase is subject to the closing of the offering. The closing of the offering is not conditioned upon the closing of the repurchase.
J.P. Morgan and Citigroup are acting as joint lead book-running managers for the offering. The underwriters may offer the shares of Class A common stock from time to time for sale in one or more transactions on the NYSE, in the over-the-counter market, through negotiated transactions or otherwise, at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices.
A shelf registration statement (including a prospectus) relating to these securities has been filed with the SEC and is effective. Before investing, interested parties should read the shelf registration statement and other documents filed with the SEC for information about Core & Main and this offering. You may get these documents for free by visiting EDGAR on the SEC website at sec.gov. Alternatively, a copy may be obtained from J.P. Morgan, c/o Broadridge Financial Solutions, 1155 Long Island Avenue,
This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. Any offers, solicitations or offers to buy, or any sales of securities will be made in accordance with the registration requirements of the Securities Act of 1933, as amended.
About Core & Main
Based in
Cautionary Note Regarding Forward-Looking Statements
This press release contains statements that constitute “forward-looking statements,” including with respect to the proposed offering and repurchase. No assurance can be given that the offering discussed above will be completed on the terms described, or at all. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of Core & Main, including those set forth in the Risk Factors section of the registration statement for the offering and the preliminary prospectus supplement included therein, as filed with the SEC. Copies are available on the SEC’s website at www.sec.gov.
Core & Main undertakes no obligation to update these statements for revisions or changes after the date of this press release, except as required by law.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240108215246/en/
Investor Relations:
Robyn Bradbury, 314-995-9116
InvestorRelations@CoreandMain.com
Source: Core & Main, Inc.
FAQ
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