Discover to sell $500M in common stock to public

— Credit card company Discover says it will sell $500 million worth of common stock in a public offering, and use the proceeds for possible investments or to buy back preferred stock issued to the U.S. Treasury under its bank rescue plan.

Shares tumbled more than 6 percent in after-hours trading following the announcement.

Riverwoods, Ill.-based Discover Financial Services says it also plans to offer senior notes "in the near future," depending on market conditions. JPMorgan Securities is acting as sole book-running manager of the offering. Underwriters may buy up to an additional $75 million shares.

In a related filing with the Securities and Exchange Commission, Discover also reaffirmed its guidance for fiscal third-quarter managed net charge-offs — or bad debt — between 8.5 percent and 9 percent.