Lakeland Private Placement Comes at Severe Discount to Ebola Trade

The recent Ebola crisis has more than doubled demand for Lakeland’s hazmat suits and other safety products. Considering this jump in equity, the company decided that it will make an effort to pay down its revolving credit facility.

The proceeds from the financing will be used to repay Lakeland’s 12% subordinated term loan with LKL Investments in the amount of $3.6 million. Any remaining balance of the proceeds would be put toward working capital and general corporate purposes.

In response to this announcement, shares of Lakeland initially traded down over 3% at $14.77 just after the opening bell sounded. However, it is worth noting that shares have fluctuated within a range of -3% to 2% in the opening minutes. So far shares have moved over 2.7 million in the first 30 minutes of trading, which is more or less equivalent to its average daily volume. Another thing worth noting is that Lakeland had traded as high as $19 in premarket trading, based on investors chasing Ebola stocks higher after a doctor in New York City tested positive for the Ebola virus.

The stock has a 52-week trading range of $4.75 to $29.55, and the market cap was listed as $81 million prior to any impact from this private placement.

Normally we might accuse a company of screwing its shareholders here with such a low price. That price does seem excessively low considering its trading of late, but this does help it clean up its books and gives it capital to expand operations. Unfortunately, it also reminds traders and investors yet again that when companies have micro-cap values under $100 million, and where stocks have moved up exponentially, those companies can do things out of the blue that are harmful.

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