Cott (COT) Stock Slumping After Pricing Public Common Share Offering on a Bought Deal Basis

NEW YORK (TheStreet) -- Shares of Cott Corp  (COT) are slumping, down 2.5% to $9.35 on heavy trading Wednesday afternoon following the announcement that underwriters co-led by CIBC and Barclays have agreed to purchase 14.1 million common shares at a price of $9.25 a piece.

The gross proceeds to Cott is about $130.42 million. The company intends to use its net proceeds from the offering to redeem its Series B non-convertible preferred shares and a portion of its Series A convertible preferred shares. 

Additionally, Cott granted the underwriters an option to purchase up to an additional 2.11 million common shares on the same terms and conditions, up to 30 days after the closing of this offering.

The offering is expected to close on or around June 3.

As of 2:40 p.m. ET today, about 3.06 million shares of Cott have exchanged hands as compared to its average daily volume of about 528,641 shares.

Canada-based Cott is the producer of beverages on behalf of retailers, brand owners and distributors.

The company's product lines include carbonated soft drinks, juice and juice-based products, clear, still and sparkling flavored waters, energy drinks, sports products, new age beverages and ready-to-drink teas, as well as alcoholic beverages for brand owners. 

Separately, TheStreet Ratings team rates COTT CORP QUE as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate COTT CORP QUE (COT) 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, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and feeble growth in the company's earnings per share."

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

  • The revenue growth greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 49.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Beverages industry average. The net income increased by 39.0% when compared to the same quarter one year prior, rising from -$4.10 million to -$2.50 million.
  • Compared to its closing price of one year ago, COT's share price has jumped by 37.07%, exceeding the performance of the broader market during that same time frame. 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.
  • The debt-to-equity ratio is very high at 2.71 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, COT has a quick ratio of 0.58, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Beverages industry and the overall market, COTT CORP QUE'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: COT Ratings Report

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