On Thursday, BioFuel's share price jumped almost 30% with no news and well above the maximum range of the rights offering:
Based on the initial terms of the rights offering above, anyone buying BioFuel Energy above $6.25 (80% of which is the maximum $5.00 of the rights offering) is guaranteed to face massive dilution after the rights offering is completed. In order to fund the acquisition, BioFuel is going to have to issue 4-5x as many shares as is currently outstanding, at a maximum price of $5 per share, that's going to force the fair market value considerably lower than where its trading currently. I don't have the trading mindset to participate in this kind of pump and dump, so I exited this morning at $8.15. Slightly disappointed that I won't be participating in the rights offering unless things change dramatically, but maybe I'll get an opportunity again once the transaction closes.5. The Rights Offering. Prior to and contingent upon the closing of the Acquisition, the Company will conduct a rights offering for shares of its Common Stock (the “Rights Offering”) to raise at least $70 million. Each right will permit the holder thereof to purchase shares of Common Stock for a price per share equal to 80% of the average closing price per share of the Common Stock for the 10 trading days immediately following the date of filing of the Registration Statement relating to the Rights Offering (the “Filing Date”); provided, that in no event will the price per share of Common Stock be greater than $5.00 per share, or less than $1.50 per share. Subject to certain limitations, the Rights Offering will be backstopped by certain investors determined by Greenlight.
Disclosure: No Position