Renasant Corp (NYSE:RNST) shares tanked in early trading on Monday, a week after announcing a public offering of 6.25 million shares.

The First Bancshares Inc (NYSE:FBMS) deal announcement and the common equity raise of $230 million "significantly changes the forward trajectory" for Renasant, according to Piper Sandler.

Analyst Stephen Scouten upgraded the rating for Renasant from Neutral to Overweight, while raising the price target from $35 to $40.

The Renasant Thesis: While Renasant paid a heavy price for the deal, including the significant discount on the common equity raise, this was a necessary for the company to "move into a higher tier of scale and profitability," Scouten said in the upgrade note.

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The First Bancshares franchise fits well with Renasant and the "lower cost of deposits at FBMS puts the proforma entity in a higher tier from a NIM perspective," he added.

"Most importantly, we think the additional scale, and the potential for cost saves with the deal changes the narrative around RNST," the analyst wrote.

"The company believes that the ~14% TBVPS dilution will be earned back in ~3.5 years, and while we calculate north of four years, we still think that the uptick in profitability puts the bank on a better path moving fwd," he further stated.

RNST Price Action: Shares of Renasant had declined by 3.66% to $32.15 at the time of publication on Monday.

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