UPDATE 1-Barrick offering lands with a thud, shares slide
(Adds investor comment, updates market reaction.)
TORONTO, Nov 1 (Reuters) - A massive public share offering from Barrick Gold Corp has met with sluggish demand, market sources said on Friday, with the shares of the world's biggest gold producer falling below the offer price.
Toronto-based Barrick said late on Thursday it would issue more than $3 billion worth of common shares in a bought deal to pay down part of its large debt load. The shares are priced at $18.35 each.
"I don't think this has gone really well at all," said one trading source who asked not to be named. "There's a good chance the stock will continue to work its way lower."
The weak reception for the share offering will have no impact on how much Barrick receives, but could hurt the deal's underwriters, led by RBC Capital Markets, Barclays and GMP Securities LP.
The offering followed news on Thursday that Barrick would temporarily shelve its massive Pascua-Lama mine. The gold-silver project, under construction high in the Andes on the border between Chile and Argentina, had been a key growth project for Barrick but also a drain on cash reserves.
Adrian Day, president of Adrian Day Asset Management, saw the news as a long-term negative, because the project underpins so much of Barrick's future growth.
"It looks to me like a long-term shutdown - and that removes at least a large part of the whole thesis for buying Barrick," said Day, who has about $145 million in assets under management.
Day had been building a position in Barrick's beaten-down shares before the announcement, and currently has about $400,000 in the company. But he passed on the new issue because he believed the stock would fall below the offer price.
By 2:30 p.m. ET, Barrick's New York-listed shares were down 7.4 percent at $17.95.
It was not clear how much of the offering the banks had been able to sell before the shares, which closed at $19.39 on Thursday, dropped below the offer price.
Shares of precious metal miners were broadly lower on Friday as the gold price fell to a three-week low.
In a bought deal, underwriters commit to purchase the entire offering from a client and then resell it. If they resell shares below the offer price, their margins take a hit, and they could even lose money on the deal.
RBC and Barclays declined to comment. GMP could not immediately be reached for comment.
The fall in Barrick's Toronto-listed stock on Friday - down C$1.54 at C$18.74 - was the biggest drag on Canada's main stock index, the Toronto Stock Exchange's S&P/TSX composite index .
(Reporting by Allison Martell and Euan Rocha; Additional reporting by Cameron French; Editing by Peter Galloway, Janet Guttsman and James Dalgleish)