NEW YORK (TheStreet) -- Shares of Viggle (VGGL) were falling 18.1% to $2.53 in morning trading Friday after the entertainment company announced the pricing of the 3,626,179 shares of common stock in its public offering.

Viggle priced the 3,626,179 shares in the public offering at $2.50 a share. The underwriters of the offering have a 45-day option to buy up to 543,927 shares to cover any overallotments.

The company expects gross proceeds of about $9,065,447, not counting the option. Viggle plans to use the proceeds from the offering for general corporate purposes.

The offering is expected to close on May 28.

About 1.7 million shares of Viggle were traded by 10:15 a.m. Friday, compared to the company's average trading volume of about 2.2 million shares a day.

TheStreet Ratings team rates VIGGLE INC as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:

"We rate VIGGLE INC (VGGL) a SELL. This is based on the combination of unfavorable investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 65.8% when compared to the same quarter one year ago, falling from -$13.41 million to -$22.23 million.
  • The debt-to-equity ratio of 1.01 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.16, which clearly demonstrates the inability to cover short-term cash needs.
  • Net operating cash flow has declined marginally to -$9.33 million or 8.19% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • VGGL has underperformed the S&P 500 Index, declining 19.34% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, VIGGLE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: VGGL Ratings Report