Asbury Automotive Shares Fall On Stock Float Even Though It Increases Value

Nov.16.06 | About: Asbury Automotive (ABG)

Asbury’s Automotive Group (NYSE:ABG) stock ended down 8% yesterday as the company announced a secondary stock offering of 3.1 million shares. Now usually the stock drops because shares are issued that are diluting the existing owner’s earnings (per share). But in this case, the shares are being sold on behalf of Ripplewood Partners, the private equity group that initially put Asbury together.

There is no dilution (that I am aware of) occurring here. As a result, I am rather perplexed with the stock price reaction. If anything, yesterday’s announcement eliminates a “hangover” fear in the stock where investors have been concerned about the holding group dumping a bunch of shares on the open market. Today’s announcement also improves the float in this rather illiquid security. All positives in my book.

ABG 1-yr chart:

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