Brookdale Senior Living, Inc BKD saw its already battered share price drop 33% on Wednesday. The stock closed at $4.92 Tuesday and then fell to a 52-week low of $3.27 Wednesday afternoon before closing the day at $3.29 – down 56.7% from its 52-week high of $7.61
Wednesday’s price drop came after the company announced a public offering of 2.5 million tangible equity units to raise $125 million for its operations. The offering is dilutive to current investors, effectively reducing the value of their shares.
Is this recent price movement an opportunity to buy, or a signal to run?
From the surface, things haven’t looked positive for Brookdale lately as the company is still dealing with the lasting effects of the COVID-19 pandemic and contending with higher expenses across its facilities due to inflation. Occupancy rates fell from 84.5% in the fourth quarter of 2019 to 69.6% in the first quarter of 2021.
However, there have certainly been improvements since then. Occupancy has been climbing at a steady pace, hitting 77.2% in October. If the company reaches its pre-pandemic occupancy rate, it could realize $350 million of incremental revenue while its operating expenses will mostly remain fixed.
Assuming Brookdale continues on its current path to recovery, there's potential for long-term upside in its share price. The latest offering will certainly affect that potential upside, but will likely prove to be a less-costly move than taking on more debt.
The big question, however, is whether Brookdale can hit its pre-pandemic occupancy before needing to raise more capital to stay afloat.
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