Yes, secondary offerings are dilutive to existing shareholders because it adds to the public float. Yes, secondaries are often made when a selling holder thinks it may be a good time to sell the underlying stock. While this adds to the public float, it actually gets the company a bit closer to being its own entity. We have to see if these were converted B shares, or if they were just pure A shares. If they were converted it will clean up a lot of the companies ultime voting power, but even if they are just the A class this still gets other voters into the fray. As far as if it still has room, well the markets will have to decide that. It closed less than 2% from its 52-week highs and is essentially up 200% from its 52-week trading lows.

The second function is that this fits in with Time Warner Inc.'s (TWC) strategy of focusing on its key initiatives. The company is already selling AOL Europe on the web access side. It has announced that it will be selling some of its underperforming magazines. Time Warner Cable will also be its own public company within 3 months to 6 months according to the Adelphia filings and according to a recent presentation made to investors this week.

With this share sale, the companies will be raising some $495 million spread out amongst the sellers. It is still too early to see what the exact pre-marker trading indications are for TWTC. Usually these trade lower on the announcements of secondary offerings, and stocks are usually treated harsher when it is a shareholder that is the recipient of proceeds instead of the company.

It won't be a surprise at all if this stock gaps down a bit by the open and it could be by several percentage points. It is usually hard for new investors to feel the love right off the bat when a secondary offering is announced and they get to stomach the dilution and instant price drop, but in this case it is probably good for Time Warner Telecom in the long run.