Why Cal-Maine Foods Stock Cracked Today

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.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Selling (and buying) Cal-Maine stock

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.

Is this good or bad news for Cal-Maine?

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.

Should you invest $1,000 in Cal-Maine Foods right now?

Before you buy stock in Cal-Maine Foods, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cal-Maine Foods wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $526,499!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $687,684!*

Now, it’s worth noting Stock Advisor’s total average return is 818% — a market-crushing outperformance compared to 156% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 14, 2025

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cal-Maine Foods. The Motley Fool has a disclosure policy.