Market Overview

The Strange Timing Of NextEra's Stock Offering

The Strange Timing Of NextEra's Stock Offering

NextEra Energy Inc (NYSE: NEE) shares traded lower by 5% on Wednesday after the company followed up its Monday announcement of a four-to-one stock split by announcing an equity offering on Tuesday after the market close.

On Wednesday morning’s PreMarket Prep, co-host Dennis Dick said the timing of the equity offering is interesting given the way stocks have been performing lately following split announcements.

“You do a four-for-one stock split to pump your shares up and then you do an offering? Just dirty, man. It’s legal, but sounds really dirty to me. And everybody who bought on that stock split is burned,” Dick said.

Even though stock splits don’t inherently increase the market cap of the stock or fund, stock splits are generally seen as a positive by the market. Stocks are often put in a position to split their stocks only after an extended period of strong returns. NextEra shares are up 194% overall in the past five years.

Related Link: 'Nothing Short Of Stupid,' Hedge Fund Manager Says Of Post-Split Gains In Apple And Tesla

Following The Tesla Playbook: Recent high-profile stocks Apple, Inc. (NASDAQ: AAPL) and Tesla, Inc. (NASDAQ: TSLA) also rallied after announcing stock splits. However, Tesla critics called out the company for announcing a $5 billion stock offering the day after its stock split.

Dick said stock splits do not actually contribute any fundamental value to a stock, but offerings are fundamentally dilutive, meaning they reduce investors’ ownership of the company.

He said the timing of the announcement is no coincidence, and the company certainly knew about the offering before announcing the split.

“There’s underwriters and stuff involved. So they pumped it up with the split to try to get their offering done at a better price. And in my opinion, and obviously I haven’t gone into the details of it all, but just looking at the headline, it sounds to me like it was a pump-and-dump,” Dick said.

Watch to the full discussion on NEE in the clip below, or listen to the podcast here

PreMarket Prep is a daily trading show hosted by prop trader Dennis Dick and former floor trader Joel Elconin. You can watch PreMarket Prep live every day from 8-9 a.m. ET Benzinga's YouTube channel, and the podcast is on SpotifyiTunesGoogle PlaySoundcloudStitcher and Tunein.

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