Novanta Inc. (NOVT), a precision technology provider for medical and advanced industrial applications, saw its shares tumble 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.

Late Wednesday, Novanta commenced an offering of 11 million 3-year mandatory convertible tangible equity units, aiming to raise approximately $550 million. The Bedford, Massachusetts-headquartered company intends to use a portion of the net proceeds to repay about $317 million of indebtedness under its revolver. The remaining funds will be allocated for working capital and potential acquisitions, among other corporate purposes. JP Morgan and Bank of America are serving as joint bookrunners for the offering.

This capital raise comes on the heels of Novanta's recent Q3 earnings report. The company, which is incorporated in Canada, reported a 1.4% year-over-year revenue growth to $247.8 million and posted adjusted earnings per share of 87 cents, up from 85 cents a year ago. Despite the recent positive performance, with shares gaining about 27% over the past month, the stock remains down 13% year-to-date. Analysts maintain a cautiously optimistic outlook, with 2 rating NOVT as "strong buy" or "buy", and 2 others rating it as "hold", with a median price target of $158.50, according to LSEG data.