Stock Watch: Red Hat Announces Secondary Offering

Shares of Red Hat (Nasdaq: RHAT), which sells packaged versions of the Linux operating system, fell nearly 11 percent in early trading today, tumbling 14-1/2 to 117-3/4.

On Friday, the company announced that it has filed a registration statement for a secondary offering of its stock. The company expects to sell 2.75 million shares, with certain shareholders selling 1.25 million shares.

Today’s decline is no surprise, because secondary offerings often bring down stock prices. With more shares available to be purchased, demand is no longer as high.

Shares of Red Hat have been a top performer since the company went public last year, and even after today’s decline, the company is worth more than $18 billion. It is understandable that some people are taking profits, especially when one considers that Red Hat is still trading at about three times its all-time low.

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