(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Micron Technology Inc. (MU) stock has risen by nearly 88 percent so far in 2017, and almost 144 percent over the past 52 weeks, easily outperforming the S&P 500. The chipmaker sold 29.3 million Micron shares worth $1.2 billion in a secondary offering on October 11. The deal was met with robust demand, resulting in a 20 percent upsizing, at only a mild discount to the previous day's closing price of $41.61. 

According to reports, Micron issued 29.3 million shares priced at $41 a share, resulting in proceeds of $1.2 billion. The deal was upsized from an original indication of $1 billion, according to a SEC filing. The demand appears to have been strong based on its upsizing, and the aggressive pricing at $41, which was a 1.5 percent, or $0.61, discount from Micron's closing price on October 11.

The company plans to use $476 million to redeem about $438 million in debt, according to a SEC filing. In total, Micron issued about 29.3 million shares, which was only a mild dilution of its diluted shares outstanding of 1.177 billion, as of its last quarterly filing

MU Chart

MU data by YCharts

The deal's 20 percent upsizing and the mild discount to the stock's closing price of $41.61 suggest the secondary offering was met with a great deal of demand. The pricing should be a positive for Micron going forward because it sets a new floor price for the stock.

Investors that did not participate or receive their complete allocation will likely view any trading that takes place below $41 as an area to step in and buy the stock at a "perceived discount."




Another sign the deal was likely to head in the right direction was that Micron traded lower at the start of trading on October 11, after the offering was announced. However, shares were able to regroup and trade only slightly lower on the day, less than 1 percent, or just $0.37, on total trading volume of 52 million shares. That was almost double the average daily volume of 30 million shares.

Given the upsizing of the deal, and previous day's trading, it would not be surprising to see Micron stock find strong buying activity at $41, and trade above the deal price as institutions that didn't receive their full allocation could be aggressive buyers. 

The offering presented an opportunity for Micron to take advantage of its astronomical rise over the past year, and investors seemed more than willing to participate. (See also: Micron Shares May Rise 18%, Options Trades Indicate.)


Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

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