What Happened?
Shares of commercial real estate lender Starwood Property Trust (NYSE: STWD) fell 3.2% in the afternoon session after the company announced the pricing of an upsized private offering of $550 million in unsecured senior notes.
The debt, which carries a 5.750% interest rate and is due in 2031, was increased from an initially planned $500 million. Investors reacted negatively because taking on additional debt increases the company's financial obligations and future interest expenses, which can impact profitability. While the company stated the funds would be used to finance or refinance green and social projects, the market appeared more focused on the risks associated with the increased debt load.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Starwood Property Trust? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Starwood Property Trust’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 4.5% on the news that the company priced a public offering of 25.5 million shares of its common stock.
The offering is expected to raise approximately $508 million in gross proceeds, which could increase to around $584 million if the underwriters exercise their option to purchase an additional 3.8 million shares. This move often leads to a temporary drop in a stock's price because the issuance of new shares can dilute the ownership stake of existing shareholders. Starwood intends to use the net proceeds to partially fund its recently announced $2.2 billion acquisition of Fundamental Income Properties, a net lease real estate platform. The remainder of the acquisition will be funded through a combination of cash and debt. While the acquisition is expected to be accretive to distributable earnings, the immediate impact of the stock offering is shareholder dilution.
Starwood Property Trust is up 1.2% since the beginning of the year, and at $19.27 per share, it is trading close to its 52-week high of $20.97 from July 2025. Investors who bought $1,000 worth of Starwood Property Trust’s shares 5 years ago would now be looking at an investment worth $1,277.
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