James Kar's  Instablog

I have been a big fan of China Natural Gas (NASDAQ: CHNG) as you can see from my prior posts.  Today, CHNG surged close to 20% at $11.25 (at this writing) without apparent reason.  The only news is that the company successfully completed its public offering of more than 5 million shares and raised about $47 million (after underwriting expenses).  The proceeds will be used for constructing liquefied natural gas facility, acquiring 8 natural gas fueling stations, buying 8 trucks to transport the natural gas.  Also, part of the proceed will be used to establish a joint venture with China National Petroleum Corp.

Obviously, the public offering news is not new so the stock price already reflected the potential of earning dilution.  However, if the offering proceeds can actually increase both revenue and earnings above the cost of equity, then the offering is welcomed by investors.  Based on today's price action, investors are pleased that the stock offering is successful and believe the managment can increase its earnings with the additional equity funding.