Merrimack, N.H. (
was down close to 7% on Monday, after a venture capital firm that owns the largest stake in the solar equipment maker's stock said it would offer 25 million shares in a secondary offering.
GT Solar has previously filed a shelf registration to cover the 105 million shares that are owned by venture capital group Oaktree Capital Management and GFI Energy Ventures.
The shelf registration has served as an overhang on GT Solar shares, as investors and analysts have known that at some point the venture capital investors would start selling shares en masse, and at a discount to current share price -- and that's what happened on Monday.
While the pricing of the secondary offering was not available, analysts said it is reasonable to expect the secondary offering to be priced at a discount, maybe as much as a 10% discount, to current share price.
The GT Solar secondary offering is not a secondary offering of new common shares, which typically leads to dilution of existing shares and a selloff.
It is also important to note in the case of GT Solar that company management gains nothing from the proceeds of the secondary, as it is being conducted by the venture capital fund that is the public company's biggest shareholder. What's more, GT Solar is in a good cash position.
However, the secondary offering does increase the supply in the market of shares that are being sold at a discount. While that increases the liquidity in GT Solar trading -- a good thing -- it also increases the pressure on the stock price, as could be seen on Monday with the decline in GT Solar's share price of 6.55%, or 39 cents, to $5.56.
What's more, with 105 million GT Solar shares covered by the existing shelf registration, but only 25 million to be sold at the current time, there is still quite a lot more venture capital unloading of GT Solar shares to come, analysts said.