Will the issuance of 10,666,667 Class A shares dilute existing shareholders and how significant is the dilution?
Short answer:
Yes. The sale of 10,666,667 new Class A common shares will increase the total number of Ramaco Resources shares outstanding, which inevitably dilutes the ownership percentage of every shareholder who does not participate in the offering. The magnitude of the dilution depends on how many shares were already outstanding before the deal; the press release does not give that figure, so we can only express the dilution in relative terms and illustrate a few plausible scenarios.
1. Why the issuance causes dilution
| Concept | Explanation |
|---|---|
| Shares outstanding before the offering | The pool of equity that existing shareholders own. |
| New shares sold | 10,666,667 Class A shares were issued and sold to the public. |
| Total shares after the offering | = (Existing shares) + 10,666,667. |
| Ownership percentage | Each existing shareholder’s stake is now measured against a larger denominator, so the percentage they own falls. |
| Earnings‑per‑share (EPS) | Unless the capital raised is immediately accretive (i.e., generates more earnings than the dilution would erase), EPS will be lower on a per‑share basis. |
Therefore, the transaction does dilute existing shareholders.
2. How to calculate the dilution percentage
The dilution impact can be expressed as the proportion of the post‑offering share pool that the new shares represent:
[
\text{Dilution %} = \frac{\text{New shares}}{\text{Existing shares} + \text{New shares}} \times 100
]
Plugging in the known number of new shares (10,666,667) gives a formula that can be applied once the “existing shares” number is known.
3. Illustrative scenarios
Because the press release does not disclose the pre‑offering share count, we can illustrate the dilution range with a few reasonable assumptions based on typical market‑cap sizes for a company listed on NASDAQ under the ticker METC.
| Assumed pre‑offering shares | Post‑offering total shares | Dilution caused by the 10.7 M new shares |
|---|---|---|
| 20 million | 30.67 million | ≈ 34.8 % |
| 50 million | 60.67 million | ≈ 17.6 % |
| 100 million | 110.67 million | ≈ 9.6 % |
| 150 million | 160.67 million | ≈ 6.6 % |
| 200 million | 210.67 million | ≈ 5.1 % |
The actual dilution will be the figure that corresponds to the real number of shares outstanding before the offering.
4. Why the dilution may be considered “significant” (or not)
Relative size of the raise – The offering raised roughly $200 million (the headline figure). If that capital is deployed to fund projects that increase future cash flow, the long‑term value per share could improve, partially or fully offsetting the mechanical dilution.
Current ownership concentration – If a few institutional investors already hold large blocks, the issuance of a fresh 10.7 M‑share tranche may noticeably shift voting power and influence.
Market perception – Investors often view sizable equity raises as a sign that the company needs cash, which can pressure the stock price in the short term, especially if the proceeds are not earmarked for high‑return growth initiatives.
Comparison to historic dilution – If Ramaco’s prior equity issuances were much smaller (e.g., a few million shares), a 10.7 M increase could be one of the larger dilutive events in its recent history, making it more material.
5. Bottom‑line assessment
| Question | Answer |
|---|---|
| Will the issuance dilute existing shareholders? | Yes. The 10,666,667 new Class A shares increase the total share count, reducing each non‑participating shareholder’s ownership percentage. |
| How significant is the dilution? | The significance hinges on the pre‑offering share count. If Ramaco had roughly 100 M shares outstanding, dilution is about 9.6 %; if it had 50 M, dilution is about 17.6 %, etc. Without the exact existing‑share figure from the company’s latest SEC filing, we can’t quote a precise percentage, but the dilution will be in the single‑digit to low‑double‑digit range for a typical mid‑cap NASDAQ issuer. |
Actionable next step for an investor:
Locate Ramaco’s most recent Form 10‑K or Form 8‑K (the filing that announced the offering) – it will list the exact “common shares outstanding” figure. Plug that number into the dilution formula above to obtain the precise percentage. Then evaluate whether the $200 million of proceeds are expected to generate a return that exceeds the dilution impact (e.g., by reviewing the company’s use‑of‑proceeds narrative, project pipeline, and projected incremental earnings).