Shares of Novanta Inc (NOVT), a precision technology provider for medical and advanced industrial applications, tumbled 6.33% in pre-market trading. The significant drop comes as the company announced plans for a substantial capital raise through an equity units offering.

Novanta commenced an offering of 11 million 3-year mandatory convertible tangible equity units, aiming to raise $550 million. The company intends to use a portion of the net proceeds to repay approximately $317 million of indebtedness under its revolver, with the remainder allocated for working capital and potential acquisitions. JP Morgan and BofA are serving as joint bookrunners for the offering.

This move for additional funding comes shortly after Novanta reported its Q3 results, where revenue grew 1.4% year-over-year to $247.8 million, and adjusted EPS increased to 87 cents from 85 cents a year ago. Despite recent gains of about 27% over the past month, Novanta's stock remains down 13% year-to-date. The market's negative reaction to the equity offering highlights investor concerns about potential dilution and the company's need for substantial additional capital.