The mass raising of capital continues as companies attempt to grab liquidity and shore up their balance sheets. I've never seen anything like this, but that's becoming a phrase used too often these days. We've seen several secondary offerings in the industries most affected by the pandemic, including restaurants.
On Tuesday, Denny's Corp. (DENN) became the latest restaurant name to eat at the secondary offering trough, announcing an offering of 8 million shares while granting underwriters the option to buy an additional 1.2 million shares. If fully subscribed, that's an additional 9.2 million shares, which is equal to 16% of Denny's current shares outstanding. As is typical in secondary offerings, the market does not like the news and Denny's shares were down 14% in pre-market trading Wednesday morning. DENN was a $20 stock pre-pandemic and the secondary offering likely will push its price to less than half that figure.
In early May, Dave & Buster's Entertainment Inc. (PLAY) offered 9.6 million shares, equal to 30% of its pre-offering shares outstanding. That offering was priced at $10.44 a share, a 28% discount to the stock's pre-offering price, but shares have recovered to the $13 level since then. Truth is, Dave & Buster's has been all over the map, hitting the $20 level in early June. Pre-pandemic, PLAY traded in the high $40s in February.
In late May, Ruth's Hospitality Group (RUTH) offered $43.5 million in stock, plus up to an additional $6.525 million in shares, that reportedly was priced in the $8 to $8.25 range, although additional details have not been released. The offering could increase Ruth's share count by 22%. Shares hit the $13 level in early January, but closed at $8.16 on Tuesday. Pre-pandemic, RUTH was trading in the low $20s.
Darden Restaurants (DRI) was somewhat early to the party, selling 7.83 million shares (and up to 1.17 million additional shares) at $58.50 in April. If all shares were sold, they represented a 7.5% increase in share count, not nearly as dilutive as the other three. Darden shares closed at $75.77 on Tuesday, 30% above the secondary offering price. But now for a dose of reality: DRI was trading in the low $120s in February.
That's just a handful of equity offerings in the restaurant sector. Countless companies in that and other sectors have sold debt, drawn down their revolvers, or both. Balance sheets have been radically altered in some cases in order to survive. When we get back to "normal," there will be fallout; companies will be more highly levered and shareholders stakes diluted, but at this point survival trumps all else.