Why Cal-Maine Foods Stock Cracked Today

Rich Smith, The Motley Fool

Wed, Apr 16, 2025, 8:41 AM 3 min read

Shares of Cal-Maine Foods (NASDAQ: CALM), America's biggest egg producer, dropped 3% through 11:10 a.m. ET this morning -- for reasons that had nothing to do with inflation or the rising price of eggs.

Rather, Cal-Maine stock tumbled because a handful of its biggest shareholders are selling the stock, and Cal-Maine itself is buying back some of that stock at a discount.

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Let's start with the selling. Cal-Maine announced this morning that "the four daughters of the Company's late founder, Fred R. Adams, Jr.," as well as his son-in-law, plan to sell just under 3 million shares of Cal-Maine, worth just under $280 million in total at today's prices. These five inside shareholders will sell at a discount, however, charging only $92.75 for their shares.

Next, we move to the buying. Cal-Maine will itself buy 551,876 of the shares being sold in the above secondary offering, paying $50 million to purchase these shares from its founder's heirs. (The remainder of the 3 million shares will be sold publicly on the market). Cal-Maine notes that it already has a $500 million stock buyback program in place, and will be using funds from this program to buy the sellers' $50 million worth of shares.

Despite what you might think as you see Cal-Maine's share price fall today, this is all actually good news for Cal-Maine shareholders, and for several reasons.

First, Cal-Maine is buying back shares, reducing its shares outstanding, and thus concentrating earnings among fewer shares. This is the opposite of stock dilution, and good news for shareholders.

Second, preparatory to the five insiders selling their shares, Cal-Maine converted their Class A stock (offering 10 votes per share) to ordinary common stock (with one share, one vote). This eliminated supermajority voting rights, and as a result, Cal-Maine is no longer controlled by insiders.

Finally, Cal-Maine is buying back shares at a discount to the current market price. It's... buying eggs on sale! That's a good deal for Cal-Maine -- and for you, too.

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