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More Dilution at Ormat

On the heels of a very strong earnings report, Ormat announced the sale of 3.1M shares in a block to Lehman Brothers last week, sending the issue down nearly 7% on the day of the announcement. Subsequently, the stock has recovered a bit. The company plans to use the proceeds, some $60M, for equipment, development, and operations. After this placement, Ormat now has 45.3M shares outstanding and boosts a market capitalization of over $2B.

Lehman Brothers

2 Comments so far

  1. Bruce May 16th, 2008 7:22 am

    I don’t think this is dilution because these were not newly issued shares. The shares sold to Lehman Brothers belonged to Ormat Industries, the Israeli company that owns more than half of ORA shares and has loaned a lot of money to ORA. There is an SEC filing at where Ormat Industries discloses that their stake declined by that amount. I also read a news article tha said Ormat Industries would report a capitol gain on the sale.

  2. mike May 16th, 2008 7:58 am

    Bruce, always appreciate your comments. But I don’t think I’m with you here.

    When outstanding shares are X and 3M more are added to X, that’s dilution. Every existing shareholders relative percentage stake in the corporation becomes less. Right or wrong, a 5% drop in the share price shows the market views the event this way.

    I don’t own any ORA so there’s nothing personal in this from my view and, in fact, I think one of the best things ORA can do is use it’s highly valued equity as a means to finance projects, it’s a smart play, but the individual investor pays, at least in the short-term.