What is the dilution impact of issuing 1,393,355 new shares on existing shareholders' ownership percentages and earnings per share?
Dilution mechanics
Unitil is adding 1,393,355 shares to the capital‑stock that will be sold at $46.65 each.
Assuming the company’s current share count is roughly 30,500,000 (its most recent public filing), the post‑offering share base will be:
| Shares (millions) | % of total | |
|---|---|---|
| Existing shares | 30.50 M | 95.6 % |
| New shares (offering) | 1.39 M | 4.4 % |
| Total after close | 31.89 M | 100 % |
Thus, each existing shareholder’s ownership stake is reduced by about 4.4 % (i.e., a 4.4 % dilution of voting power and proportional claim on cash flows).
Earnings‑per‑share (EPS) impact
If Unitil’s net income remains unchanged, the EPS will fall in line with the share‑count increase:
[
\text{New EPS} = \frac{\text{Net Income}}{31.89 M}
\quad\text{vs.}\quad
\text{Old EPS} = \frac{\text{Net Income}}{30.50 M}
]
The dilution ratio of 1.393 M / 30.50 M ≈ 4.6 % means EPS will be roughly 4–5 % lower after the offering (the exact figure depends on the precise prior share count and any concurrent share‑repurchase activity).
Trading implications
- Short‑term pressure: The 4–5 % EPS compression and the 4.4 % ownership dilution tend to push the stock lower on the announcement, especially if the market views the capital raise as non‑value‑adding.
- Fundamental offset: The proceeds (~$65 million) can be deployed to fund growth projects, improve the balance sheet, or refinance higher‑cost debt. If the market believes these uses will lift future earnings, the price impact may be muted.
- Actionable view: Look for a sell‑or‑hold bias until the pricing is digested and the company’s use‑of‑proceeds is clarified. If the capital is earmarked for high‑return investments (e.g., capacity expansion or regulated rate‑case growth), a buy on dip could be justified once the price stabilises, as the long‑term earnings upside may outweigh the modest dilution.