Bridgepoint Massive Share Offering, Overhang Versus Dilution (BPI)

Bridgepoint Education, Inc. (NYSE: BPI) is getting absolutely pounded this morning.  After the close on Friday came word that Bridgepoint filed a registration statement with the SEC to register for the resale of a whopping 34,589,220 shares of common stock.  This was over $1 billion in stock at the time, while the market capitalization was only $1.6 billion.

What makes matters more harsh is that this is not for a large acquisition, nor to pay off debt.  These shares are simply being made available for sale by Warburg Pincus Private Equity VIII, L.P.   None of the shares are being sold by the company.  This represents a massive overhang on the real public float.

Warburg Pincus and its approved entities will be free to offer these shares from time to time through public or private transactions “at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices.”

What is interesting is that the filing showed that this is not a dilution of shares of common stock currently outstanding.  Technically that is true.  What this does though is to greatly expand the free float that can be bought and sold in the public markets after Warburg Pincus locks in the sales.

Shares closed at $30.50 on Friday and the stock is indicated down a sharp 8.9% at $27.80 against a 52-week range of $12.75 to $30.62.  The average volume is only about 650,000 shares and that recent high is also an all-time high since this came public in 2009.

JON C. OGG