Shares of Select Comfort Corp. climbed Tuesday as the mattress maker announced plans to lower its debt and bolster working capital by selling some shares.
Late Monday the Minneapolis company said the offering would meet a requirement of an amended credit agreement from last month. Early Tuesday morning it provided more details, saying it would sell 3.8 million shares of common stock at $4.75 per share.
Bradley Thomas of KeyBanc Capital Markets said that an offering between 3 million and 4 million shares would completely eliminate Select Comfort's debt.
"We believe completion of the deal will remove an overhang, and we would be buyers of the stock on this news," he wrote in a note to clients.
Thomas maintained a "Buy" rating and $9 price target.
Select Comfort's stock gained 30 cents, or 6 percent, to $5.31 in morning trading. Over the last year, the shares have traded in a range of 20 cents to $7.01.