Why Shares of Nano Nuclear Energy Are Powering Down Today
Key Points
Nano Nuclear Energy announced a $400 million equity placement.
Proceeds from the transaction will be used to help the company advance development of its micro reactor.
Although investors fear dilution, the company isn't generating revenue, so raising capital through the issuance of equity is unsurprising.
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Poised to break its five-day streak of closing higher than the day before, Nano Nuclear Energy (NASDAQ: NNE) stock is falling steeply this morning. With the company's announcement of an equity placement, investors are choosing to click the sell button on the nuclear energy stock.
As of 10:45 a.m. ET, shares of Nano Nuclear Energy are down 12.3%.
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Dread of dilution is contributing to dour sentiment
Nano Nuclear Energy announced its entry into securities purchase agreements regarding the purchase and sale of 8,490,767 shares of common stock to institutional investors in transactions that will provide the company with $400 million in gross proceeds. The offering is expected to close later this week or shortly thereafter.
According to the company, the proceeds from the sale will be used for a variety of purposes, including "to advance development, construction and regulatory licensing activities for its lead micro nuclear reactor program, the KRONOS MMR Energy System, continue development of its other micro reactor projects and other nuclear energy related business lines, pursue potential strategic acquisitions, and for general corporate purposes."
What should an investor to do in the face of today's drop?
While it'd be nice, stocks can't rise forever. It's no wonder, therefore, that shares are pulling back today after several days of climbing higher -- a decline that's especially unsurprising considering the $400 million equity placement that the company announced.
Although investors don't like the prospect of dilution, the access to capital is necessary to support the company's growth since it's not generating revenue yet. For investors with ample risk tolerance who are looking for a nuclear energy stock with growth potential, now's a great time to consider Nano Nuclear Energy.
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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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