The Jacksonville, Fla.-based operator of short line and regional railroads in Canada and the U.S. set a price late Monday for the offering of 21 million of its shares at $15 each.
That was below its estimate last week that the shares would fetch $16 to $18 a share.
By late morning Tuesday, RailAmerica shares fell $1.08, or 7.2 percent, to $13.92.
Before trading began, expectations had been high for RailAmerica stock as the recent market rally in equities encouraged a number of companies to go public. Analysts said investors see transportation companies as an opportunity, because they tend to lead the broader economy out of recession, and weakened transportation demand may soon revive.
The company sold 10.5 million shares and a Fortress Investment Group affiliate sold 11.5 million shares.
Fortress, which bought RailAmerica in February 2007, expects to own about 55.8 percent of RailAmerica after the offer closes Friday.
In a filing with the Securities and Exchange Commission, the company said it believes opportunities to buy assets at good prices are increasing because of tighter credit markets and declining transportation volumes, which give other companies more incentive to sell. It also leaves a limited number of buyers to snatch up asset deals, the company said.
RailAmerica's 40 affiliated railroads operate in 27 states and 3 Canadian provinces with about 7,500 miles of track. They moved over 1 million carloads of freight for 1,800 customers last year, hauling a variety of products; including farm equipment, food, lumber, paper, metals, chemicals, plastics and coal through relationships with other bigger railroads.
Last year RailAmerica earned $16.5 million on revenue of $508.5 million. In the first six months of this year, the company reported net income of $19.2 million on revenue of $206.5 million.
J.P. Morgan Securities Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Morgan Stanley & Co. Inc. represent underwriters.
Underwriters received a 30-day option for up to 1.6 million additional common shares, and RR Acquisition Holding LLC granted underwriters the option for up to 1.7 million additional shares. The acquisition-holding company is owned by private-equity funds managed by an affiliate of Fortress.