The Bank of Queensland Limited (ASX: BOQ) share price is down 6 per cent to $8.12 today after the regional lender returned to trade on the back of a $250 million capital raising.
The bank issued 32.1 million new shares at $7.78 per share to institutional investors in a result it reported was at the “top of the bookbuild range”.
After a company raises capital its share price will normally fall in order to reflect the dilutory effect of the capital raising.
In other words due to their being far more shares on issue each share is now worth less in terms of the potential profit attached to it.
Commonly some investors will also sell down their existing holdings after a capital raising to book instant profits, or simply to help find the cash required to originally participate in the raising.
The widespread selling will send shares lower if there are insufficient bidders to meet the offer price.
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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.