Why is Ensco (ESV) stock dropping so sharply? TheStreet's Jim Cramer said investors should look to other energy companies for perspective. Ensco is an oil driller -- part of an industry that's fallen far out of favor with investors, Cramer said.
Ensco shares are down 5.8% Friday after the company announced it will sell 57.5 million shares at $9.25 in a secondary offering.
Cramer, the co-manager of the Action Alerts PLUS portfolio, said on CNBC's "Mad Dash" segment that some investors might think this offering is too much. However, there have been similar secondary offerings from other energy companies -- notably Pioneer Natural Resources (PXD - Get Report) , Hess (HES - Get Report) and Devon Energy (EVN - Get Report) -- and these have worked out for the companies, even though their stocks struggled at first.
The decline in the oil drilling sector is noticeable in Ensco's decline from $60 in 2014 to its current price below $10. However, if investors are looking for drillers, Ensco is a very fine company and a much better buy than Transocean (RIG - Get Report) .
It's not surprising to see these offerings after listening to conference calls from the banks, Cramer saud. These energy companies need to raise capital, and this is how it's done.