John Goodgame Quoted in Law360 on Stock Sales Amid Declining Oil Prices
Akin Gump oil & gas and natural resources partner John Goodgame was quoted by Law360 in an article that looks at the impact of declining oil prices on M&A activity within the oil and gas sector.
“Stock Sales A Sign Of Strength Amid Weak Oil Prices” notes that despite oil prices falling below $50 per barrel, “the equity markets remain open.” Goodgame predicted, however, “One thing you may see is companies look to sell assets, or raise equity capital, because they need to delever. Whether [equity] will be available and at what price, that’s another question.”
While a stock offering can give companies additional cash to buy up some of those assets, selling additional stock at a time of low oil prices has a downside —diluting shares when the stock price has already been hit by the drop in oil prices. Some companies, according to Goodgame, are convinced that equity capital isn't available to them at a price that would be acceptable.
Goodgame added that the concern over whether to raise equity capital right now “centers around the fact that equity capital is more expensive relative to times of higher commodity prices. The second concern is whether there is sufficient demand in the markets for additional equity capital at a price that's acceptable to the issuer.”