A shopper carries an Express Inc. bag while walking in the Center City neighborhood of Philadelphia Pennsylvania, the United States on Friday, June 24, 2016.
Charles Mostoller | Bloomberg | Getty Images
Retailer Express shares plunged more than 22% on Thursday after the clothing retailer announced it was selling up to 15 million shares.
Express plans to sell the stock, which could account for more than 22% of the outstanding shares, through an “on the market” offering. This means that the newly issued shares will be sold at market prices from time to time. Its advantage is that Express has control over when and how much it will sell the stock.
In a press release, Express said it plans to use any proceeds for general corporate purposes, which could include paying back debt or investing in e-commerce.
Express’s sell-off on Thursday comes after its stock rose more than 35% on Wednesday, as part of a meme stock-trading frenzy that also boosted shares of AMC Entertainment, GameStop, BlackBerry, and Bed Bath & Beyond Has.
Express stocks were up nearly 110% over the past month. The so-called meme stocks, which are generally shunned by Wall Street, are hailed by retail investors on online forums like Reddit’s WallStreetBets.
Roxanne Meyer, managing director at MKM Partners, told clients that daily trading volumes of Express shares are still well above historical levels, fueled by Reddit speculation.
By 10:30 a.m. ET, around 11.5 million Express shares had already changed hands. Over the past 10 days, the average daily volume was nearly 27 million shares. Express shares are up more than 615% since the market closed on Wednesday. The retailer has a market value of $ 349.5 million.
Express’s shares jumped early Thursday morning after the retailer reported better-than-expected business results for the first quarter. Its business was said to have reached a tipping point after Easter as more consumers were vaccinated and states began lifting Covid-related restrictions. People also returned to the stores and bought casual and work-related clothing.
However, MKM’s Meyer noted that weak store traffic, persistently weaker demand for siding and delays in product shipping continue to be headwinds for the mall-based retailer. Express operates more than 500 retail and factory outlet stores in the United States and Puerto Rico.
Last year, in the midst of the Covid pandemic, Express was on many analysts watch lists as a retailer poised for bankruptcy. However, the company managed to find additional funding outside of a judicial reorganization to keep its business afloat and weather the health crisis.
According to FactSet data, around 7.7% of Express’s outstanding shares are being sold short. Short sellers borrow the stock from an investment bank and sell it in the hopes of buying it back at a lower price and returning the stock, pocketing the difference.
The latest stock offering could add additional liquidity to Express. The clothing retailer wouldn’t be the only one to use the newfound interest in its stocks to raise funds. AMC also announced Thursday it would sell more than 11 million shares, rocking the cinema chain’s stocks.