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Jerry Jones’s Shale Driller Tumbles on Plan to Issue Stock

Cowboys Owner Jones’ Shale Driller Selling Shares; Stock Tumbles

(Bloomberg) -- Comstock Resources Inc., the shale driller controlled by Dallas Cowboys owner Jerry Jones, plans to sell at least 40 million shares of common stock to redeem preferred convertible stock and reduce debt.

The offering announced late Wednesday would represent a 21% dilution to current investors; that expands to 24% if underwriters exercise the full option to purchase an additional 6 million shares. The stock was down 29% to $4.63 at 10:39 a.m. in New York after earlier dipping as much as 36%.

Redeeming the preferred stock will relieve Comstock of dividend obligations that amount to 10% a year and prevent an even-larger dilution when the preferreds become convertible into common stock starting in July, a group of Stifel Nicolaus & Co. analysts including Jane Trotsenko said in a note to clients.

Comstock is testing the market at a time when rival gas producers such as Chesapeake Energy Corp. have seen financing options dry up amid a worldwide glut of the fuel and a demand outlook hobbled by Covid-19 lockdowns. Earlier this week, Chesapeake warned investors it had no access to capital, customers might be in danger of non-payment, and the company was on the verge of collapse.

Frisco, Texas-based Comstock priced the new shares at $5 apiece, according to a statement. That represents a 23% discount to Wednesday’s $6.50 closing price. The offering comes just a week after Comstock’s lenders lowered the driller’s borrowing base by 11% to $1.4 billion.

As recently as November, Jones said he was keen to expand his holdings in the natural gas-rich Haynesville shale region of Louisiana. Comstock’s output is 98% gas, which has insulated the company from the worst ravages of the unprecedented collapse in crude prices.

©2020 Bloomberg L.P.