On March 11, 2025, Matthews International Corporation (MATW) filed a three million share shelf registration under form S-3 with the U.S. Securities and Exchange Commission. Along with the shelf, it also filed a prospectus under which it would issue 1.25 million shares (out of the three million share shelf).
The sole underwriter for this share issuance is Truist Securities, affiliates of which are also lenders under the company’s bank credit facility. Under the terms of the offering, the company may issue shares in “at-the-market” offerings or in negotiated transactions from time to time. At today’s closing price of $22.58, the entire 1.25 million share offering would raise $28.2 million before underwriting fees and discounts and represent an increase in the company’s outstanding shares of 4.0%. The entire 3.0 million share shelf would raise gross proceeds of $67.7 million and represent a 9.7% increase to the company’s share count.
The S-3 and prospectus filing raised some eyebrows among those that follow the company, primarily, I believe, because of its timing. The stock closed today at 7% above its October 2024 (and 52-week) low of $21.09. Furthermore, the pending sale of its SGK Brand Solutions business, for which the waiting period under the Hart-Scott-Rodino antitrust act expired earlier this week, will bring in $250 million in cash when it closes, as is expected by mid-year. So why does Matthews want or need to sell shares?
Management says that it has no immediate plans to sell stock at this time, largely because of the stock’s low price. It filed the S-3 shelf registration to replace a similar registration that expired in the second half of fiscal 2024. The filing of the 1.25 million share prospectus does, however, put it in a position to sell shares immediately.
Given the economic backdrop and company specific factors, it is reasonable for Matthews to position itself to take advantage of opportunities or prepare for risks that may arise later this year and beyond. There is an increased risk of a global economic slowdown arising from what could become a global trade war as a result of the Trump administration’s push to put in place a series of tariffs. The company’s profitability struggled in fiscal 2024 and although management is pursuing a $50 million cost cutting initiative to restore profitability as quickly as possible, a meaningful recovery may take time, especially if global economic activity slows.
Matthews’ stock may also be being weighed down by uncertainty on two fronts: (1) its fight with Tesla over the intellectual property rights to Matthews’ dry battery electrode calendering technology and (2) the (now seemingly smaller) risk that the SGK transaction may delayed or possibly not close. Favorable resolutions on these matters, which could come at any time, could spark a rebound in its stock, which Matthews may want to exploit by selling some shares. The company could conceivably continue to pursue tuck-in acquisitions, but it also remains keen on reducing its outstanding debt.
March 13, 2025
Stephen P. Percoco
Lark Research
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