Crescent Energy Company (CRGY) experienced a significant after-hours plunge of 5.84% following the announcement of a planned capital raise.

The decline came after the company announced a private placement offering of $400 million of convertible senior notes due 2031, with an option for initial purchasers to buy up to an additional $60 million. Convertible debt offerings often lead to stock price declines due to concerns about potential future dilution of existing shareholders when the notes are converted to equity.

Crescent Energy stated it intends to use the net proceeds from the offering to fund capped call transactions, which are derivative deals used to help mitigate potential dilution, and to help redeem all of its outstanding 9.250% senior notes due 2028.