Why Opera Limited Stock Dropped Today

What happened

Shares of Opera Limited (NASDAQ:OPRA) were down 10.7% as of 1:35 p.m. ET Thursday after the internet browser developer announced a significant secondary offering.

So what

More specifically, yesterday after the market closed, Opera issued a press release stating it has commenced an underwritten secondary offering of 6,876,506 American depositary shares (ADSs) from a pre-IPO shareholder -- a sum worth over $90 million at Opera's current stock price at around $13.15 per share. The offering is being held pursuant to a mixed-shelf registration previously filed back in July, which gave the company the ability to sell any combination of up to $300 million in warrants, ordinary shares, preferred shares, debt securities, and ADSs offered by certain selling shareholders over the next three years.

Opera will also give the underwriters -- represented by Citigroup and Goldman Sachs as lead book-running managers -- a 30-day option to buy up to an additional 15% of the ADSs to be sold in the offering.

Now what

It's not uncommon to see pre-IPO stakeholders in any given business eventually move to cash out some of their early investments, if anything, to diversify and deploy their resources elsewhere. Still, based on Opera's current stock price trading at around $13.15 per share -- as well as the potential for an additional 15% of the ADSs to be sold to underwriters -- this offering could represent nearly 9% of Opera's current total number of shares outstanding. This also represents around one third of the total $300 million approved under the mixed-shelf registration filed in July. So it may not be the last time we see such an offering hit the wires. It's unsurprising, then, that Opera shares are trading down in response today.

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