The proposed underwriting of 3.7 million new shares will help the company raise $59 million. Existing shareholders, including Softbank Capital Partners, plan to sell and additional 8.2 million shares for proceeds of $139 million.
GSI Commerce was among the most active small-cap stocks in Thursday's trading. At mid-day, the stock was down 6% on heavy volume of over four million shares, well ahead of the average daily volume of 350,000 shares.
GSI shares recently set a new 52-week high of nearly $19, after soaring 230% since the low in November, 2008. GSI appears to be cashing in on the run-up in its shares by selling stock at this recent high price. Investors typically dislike dilutive equity offerings, and not surprisingly sold shares of GSI Commerce during today's trading session. The proposed significant sale of stock by existing shareholders is another sign that the stock has topped out.
The outlook for GSI isn't bright, and certainly doesn't justify the recent rise in share price. With analysts expecting sales to be flat and a net loss of $0.17 per share in 2009, investors are best to steer clear of GSI Commerce and take note of Softbank's decision to sell a large position of their shares at these price levels.
Ian Wyatt is the Chief Investment Strategist of SmallCapInvestor.com and author of the book, The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks.
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