Why Garrett Motion Stock Is Down Today

Core Viewpoint - Garrett Motion announced a significant secondary offering of 17 million shares, leading to a 10% drop in its stock value as investors reacted negatively to the increased share supply [1][4]. Company Overview - Garrett Motion is the former auto division of Honeywell International, specializing in turbochargers for internal combustion engine vehicles and components for hybrid and battery electric vehicles [3]. - The company underwent bankruptcy after separating from Honeywell but has since returned to public markets with substantial ownership from private equity firms that aided in its restructuring [3]. Shareholder Dynamics - The secondary offering consists of shares owned by affiliates of Oaktree Capital Management, Centerbridge Partners, and Cyrus Capital Partners, with Garrett not receiving any proceeds from this offering [4]. - Private equity investors typically do not hold long-term stakes, indicating their intention to gradually cash out to return capital to their investors [5]. Financial Performance - Despite the ownership overhang from private equity sales, Garrett has successfully transformed into a free cash flow-generating entity, with the capacity to repurchase shares and currently offering a dividend yield of 2.3% [6]. Investment Perspective - For investors seeking solid cash generation opportunities, Garrett is considered an attractive option despite the short-term volatility associated with the secondary offering [7].