Why are global camping inventories down nearly 12% today?

Just days after releasing a market-beating quarterly earnings report, Camping World Holdings (C.W.H. -11.75%) published news that wiped the smiles off the faces of many investors. The company is issuing a fairly complex new share issue at a fairly modest price, and this caused the share price to fall almost 12% on Thursday. This was a much sharper drop than the index’s 1.9% decline. S&P 500 Index index.

Almost 15 million new shares are up for sale

After the market closed on Wednesday, Camping World announced a secondary issue of shares and set the offering price. The outdoor retailer is offering just over 14.6 million shares of Class A common stock to the public at $20.50 per share. That’s more than $3 a share lower than the stock price on Wednesday, the day after it released quarterly earnings.

As is typical in such financial moves, Camping World granted the issue’s underwriters a 30-day option to purchase additional shares. This syndicate, headed Goldman Sachs And JP Morgan Chasewill be able to collectively buy up to almost 2.2 million shares.

Camping World said it will use the proceeds to purchase more than 14.6 million units from its subsidiary CWGS Enterprises. In turn, CWGS will use its proceeds for general corporate purposes to benefit Camping World. These include working capital and debt repayment.

The company expects the issue to close on Friday, November 1st.

Cautious market

Typically a company raising new equity capital will do so directly; in this case, Camping World does this through a little financial engineering involving a subsidiary. This clearly and understandably makes investors wary, and the relatively low price only reinforces this feeling.