In an indication that the lending environment is becoming increasingly risk averse, one builder hoping for a capital infusion is looking past a move to a secured revolver and choosing another option.

Late on April 16, Meritage Homes Corporation announced it was filing a preliminary prospectus supplement for a proposed public offering of up to 4,000,000 shares of common stock. After market close on April 17, Meritage put a price of $20.50 per share on the offering, which will expire April 23.

Meritage stated in a release that it will use the funds received for "working capital and other general corporate purposes."

Brent Anderson, vice president of investor relations, told Big Builder, "We are doing this offering to further strengthen our balance sheet and ensure that we have ample liquidity to take advantage of opportunities for profitable acquisitions of lots and land. We're in the position to be on the offensive versus defensive."

At least one analyst and others in the investor community view the move as a bad sign for weaker builders, not to mention shareholders whose stock will now be diluted by the new shares, but according to Anderson, "this added liquidity should be seen as a positive move."

The company has demonstrated financial discipline by generating strong cash flow in recent quarters and paying off the debt under its credit facility, which remains unsecured. And Anderson noted that Meritage remains in compliance with all of its covenants.

Meritage maintains a heavy emphasis on a lot-option model and has tempered its exposure during the downturn with less invested capital. "We expect we'll be able to reload on land at lower prices, and therefore produce better returns than if we were saddled with long land positions at historically higher prices," said Anderson. "With that in mind, we intend to pursue land deals that we believe will generate superior returns."

As of April 16, Meritage had 26.4 million shares outstanding. The offering would increase that number by slightly more than 15%. However, as of March 31, 8.4 million Meritage shares, nearly a third of total shares outstanding, were held in short positions.

Meritage will grant the underwriters an option to purchase up to an additional 600,000 shares to cover over-allotments, if any. The offering will be made through an underwriting syndicate led by Citi Markets & Banking as sole book-running manager and representative of the underwriters.

Meritage stock (NYSE:MTH) on Thursday closed down 7.1% at $20.89 in mid-afternoon trading.