IIPR stock has been an investor favorite in 2019, and it's not hard to understand why. These shares packed on an incredible 177% year-to-date. Shares of the cannabis REIT firm, Innovative Industrial Properties (NYSE:IIPR), have been spurred on by the company's business model, which is a first in the cannabis sector.
However, last week shares tumbled as the company announced it would be raising cash by offering an additional 1.25 million shares.
IIPR Stock Hit By Stock Offering
Innovative Industrial Properties has brought the real estate investment trust (REIT) model to the cannabis industry; it specializes in investments in leasing industrial properties to medical marijuana producers.
As you can imagine, business has been booming. But now the company is raising cash by floating 1.3 million shares of common stock. It will also add a potential overallotment of 195,000 shares if the offering is in high demand.
Importantly, the offer price was set at $126 a share. After the announcement, IIPR stock plunged over 10%.
The Problem Is...
Not only does the IIPR stock offering dilute current ownership stakes by at least 12%, but the price was also set over $10 cheaper than what shares were recently on sale for. It doesn't seem very fair for current investors that new ones can buy-in $10 cheaper per share, does it?
But the Potential with IIPR Stock is...
However, the bigger picture has to win out here. The company will have access to approximately $164 million in cash at a very important time. Innovative Industrial Properties is a popular company right now, but its services are likely to be demanded much more as the marijuana industry continues to grow.
The company intends on using the cash for the acquisition of new "specialized industrial real estate assets that support the regulated cannabis cultivation and processing industry."
This is one hit that investors need to take now but for a much greater long-term good. What are your thoughts on IIPR stock? Is it a win for you?
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