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Student Lender Sallie Mae Plans $2.5B Stock Sale

Embattled stock drops 6.5% as investors fret

By Jim O'Neill,  Newser User

Posted Dec 27, 2007 7:37 AM CST
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(Newser) – With a credit rating bordering on junk-bond status, embattled student loan provider Sallie Mae plans a public stock offering to raise $2.5 billion, reports the Wall Street Journal. The company will use $2 billion to buy back its own stock futures, which have lost value recently following a failed attempt to take the company private.

Investors, who originally anticipated Sallie Mae to spend between $1 billion and $1.6 billion on the purchases, were disappointed in the news and in after-market trading Sallie Mae shares lost $1.44, or 6.5%. Earlier this year, shares traded as high as $58. Current investors worry the sale of common and preferred stock will further dilute their current holdings value.

A promotional vehicle representing the Sallie Mae Fund is captured in this file photo. (PRNewsFoto/The Sallie Mae Fund)
A promotional vehicle representing the Sallie Mae Fund is captured in this file photo. (PRNewsFoto/The Sallie Mae Fund)   (Associated Press)
Student loan giants, Sallie Mae plans to offer $2.5 billion through public stock offerings.
Student loan giants, Sallie Mae plans to offer $2.5 billion through public stock offerings.   (Shutterstock.com)
One analyst voiced a concern that the offering might be the first of several steps to shore up the balance sheet, which may come at the expense of current shareholders.
One analyst voiced a concern that the offering might be the "first of several steps to shore up the balance sheet, which may come at the expense of current shareholders."   (Index Open)
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