What Happened?
Shares of commercial real estate lender Starwood Property Trust (NYSE:STWD) fell 4.5% in the afternoon session after the company priced a public offering of 25.5 million shares of its common stock. The offering is expected to raise approximately $508 million in gross proceeds, which could increase to around $584 million if the underwriters exercise their option to purchase an additional 3.8 million shares. This move often leads to a temporary drop in a stock's price because the issuance of new shares can dilute the ownership stake of existing shareholders. Starwood intends to use the net proceeds to partially fund its recently announced $2.2 billion acquisition of Fundamental Income Properties, a net lease real estate platform. The remainder of the acquisition will be funded through a combination of cash and debt. While the acquisition is expected to be accretive to distributable earnings, the immediate impact of the stock offering is shareholder dilution.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Starwood Property Trust? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Starwood Property Trust’s shares are not very volatile and have only had 3 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
Starwood Property Trust is up 3.5% since the beginning of the year, and at $19.72 per share, it is trading close to its 52-week high of $21.11 from September 2024. Investors who bought $1,000 worth of Starwood Property Trust’s shares 5 years ago would now be looking at an investment worth $1,342.
Do you want to know what moves the business you care about? Add them to your StockStory watchlist and every time a stock significantly moves, we provide you with a timely explanation straight to your inbox. It’s free and will only take you a second.