IQiyi stock pulls back sharply after large ADS offering

Shares of iQiyi Inc.
IQ,
-16.44%
plunged 17.2% in afternoon trading Tuesday, putting them on track for the biggest one-day drop in 10 months, after the China-based streaming-video company took advantage of a recent surge in prices to announce a large stock offering. The company said before the open that an offering of 76.5 million American depositary shares (ADS) priced at $5.90 per ADS, for net proceeds of $442.3 million. That represented about 10.0% of iQiyi’s current market capitalization of about $4.44 billion. The company said it plans to use the proceeds from the offering for working capital purposes, including paying its debt obligations. The company also granted the underwriters of the equity offering 30-day options to buy up to 11.475 additional ADS to cover overallotments. Even with the selloff, the stock has still rocketed 137.0% over the past three months, while the iShares China Large-Cap ETF
FXI,
-2.18%
has rallied 26.2% and the S&P 500
SPX,
-0.20%
has gained 8.8%.