NEW YORK (TheStreet) -- Vector Group (VGR - Get Report) is trading lower on Wednesday after pricing its offering of convertible debt.

By midday, shares had tumbled 6.2% to $20.39. Trading volume of 3.2 million was nearly triple its three-month daily average.

The tobacconist said it would offer $225 million worth of its variable interest convertible senior notes due 2020. Vector Group will offer also offer up to an aggregate of $258.8 million if the underwriter, Jefferies, accepts its over-allotment option in full. The senior notes will offer cash interest at a rate of 1.75% a year.

The offering is expected to close March 24, pursuant to customary closing conditions.

The Miami-based business intends to use the net proceeds of the offering for general corporate purposes, including real estate investments. A portion of capital raised may also be used in upcoming debt maturities.

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TheStreet Ratings team rates VECTOR GROUP LTD as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate VECTOR GROUP LTD (VGR) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and compelling growth in net income. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good."

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

  • The revenue growth came in higher than the industry average of 3.7%. Since the same quarter one year prior, revenues rose by 23.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for VECTOR GROUP LTD is rather high; currently it is at 55.89%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 34.95% significantly outperformed against the industry average.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Tobacco industry. The net income increased by 288.3% when compared to the same quarter one year prior, rising from $16.49 million to $64.01 million.
  • VECTOR GROUP LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. During the past fiscal year, VECTOR GROUP LTD increased its bottom line by earning $0.33 versus $0.29 in the prior year.
  • Powered by its strong earnings growth of 357.61% and other important driving factors, this stock has surged by 40.35% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.

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