Novanta (NOVT) shares plunged 5.07% in pre-market trading on Friday, following the company's announcement of a significant tangible equity units offering. The precision technology company priced 11 million units at $50 each, aiming to raise $550 million in a move that appears to have spooked investors.

The offering, expected to close next Wednesday, consists of prepaid stock purchase contracts and senior amortizing notes due in 2028. Each unit will provide quarterly installments equivalent to a 6.5% annual rate. Novanta plans to use a substantial portion of the net proceeds, approximately $317 million, to repay outstanding revolving credit facility borrowings.

The sharp stock price decline likely reflects investor concerns about potential dilution and the company's debt strategy. While the offering provides Novanta with significant capital to address its debt, the structure of the deal and its size relative to the company's market capitalization may have triggered the negative market reaction. Investors appear to be reassessing the company's financial position and growth prospects in light of this substantial capital raise.