Why Grid Dynamics Holdings Was Climbing Thursday

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What happened

Digital and technical consulting company Grid Dynamics stocks (NASDAQ: GDYN) The stock rose on Thursday as the company announced the prices of its upcoming common stock offering. Shares were up 16.4% at 11 a.m. EDT and were up as much as 17.9% on the news.

so what

This morning, Grid Dynamics announced that its common stock offering is $ 15.03 per share. The company will offer 10 million shares to the public, 4 million of which will be newly issued by Grid Dynamics and 6 million of which will be from existing Grid Dynamics shareholders.

Image source: Getty Images.

The company said it would not receive any proceeds from the sale of shares out of the 6 million shares being sold by current shareholders. This means that the only portion of this common stock offering that will raise cash for Grid Dynamics is the 4 million offered by the company itself. At an offer price of $ 15.03, the company will earn around $ 60 million and increase the outstanding shares from 54 million to 58 million.

What now

It’s strange that Grid Dynamics stock popped up on this news. Typically, offerings of common stock cause stock prices to fall as they dilute existing shareholders. In this instance, however, Grid Dynamics stock is actually trading above the offering price, at around $ 17.50 as of this writing. Yesterday, for example Real estate income Stocks fell when the company announced a common stock offering, which usually happens when companies dilute existing shareholders.

With plenty of liquidity on the balance sheet and a cash flow positive business, it is possible that Grid Dynamics could raise those funds for an acquisition, which the company has done in the past. Last year the company acquired the Dutch consultancy Daxx and recently the British consultancy Tacit Knowledge. Investors in the company shouldn’t be surprised if management announces another acquisition in the coming months.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

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