Calpine Upgraded On News Of Secondary Offering

NEW YORK (AP) — A secondary public offering by power generation company Calpine Corp. will open up a buying opportunity, an analyst said Thursday as he upgraded the stock.

On Wednesday the company said that Harbinger Capital Partners Master Fund I Ltd., a major shareholder with about a 7 percent stake in the company, plans to sell 20 million Calpine shares in a registered public offering.

Harbinger also granted the underwriter an option to purchase an additional 3 million shares. Harbinger currently holds about 32 million shares of Calpine, according to Capital IQ.

Calpine, which will not receive any proceeds from the sale, has about 442 million shares outstanding.

Following the offering, shares of Calpine tumbled 8.5 percent to close at $11.30 on Wednesday. In afternoon trading Thursday, shares rose a penny to $11.31.

Citi Investment Research analyst Brian Chin said this lower share price presents an attractive buying opportunity for investors. Chin raised his price target for the stock to $16.50 from $13.

He added that Harbinger has been in the process of diluting several concentrated positions after a challenging investment period.

"This seems to be more of a shareholder issue, not a Calpine issue," Chin said.

Chin upgraded his rating for Calpine's stock to "Buy" from "Hold." Given higher commodity prices, he also increased his 2009 and 2010 adjusted earnings before interest, taxes, depreciation and amortization estimates to $1.696 billion and $1.449 billion, from earlier estimates of $1.694 billion and $1.426 billion, respectively.