Why Nano Nuclear Energy Stock Crashed Today

Key Points

• Nano Nuclear filed SEC forms regarding a cash raise of up to $620 million.

• The company will immediately begin to try selling $400 million worth of new stock.

• Nano Nuclear is burning cash, but $400 million in new money could keep it solvent for years.

• 10 stocks we like better than Nano Nuclear Energy ›

Shares of Nano Nuclear Energy (NASDAQ: NNE), one of a handful of start-up companies aiming to commercialize small modular nuclear reactors, announced late Friday it intends to raise up to $620 million to further its nuclear endeavors.

As of 11:11 a.m. ET, investors have sold off the stock by 8%.

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Image source: Getty Images.

What is Nano Nuclear up to?

Nano Nuclear says the $620 million will take the form of common and preferred stock issuances, purchase contracts, warrants, subscription rights, depositary shares, debt securities, and/or units. The cash may be raised "from time to time in one or more offerings."

But most of the cash may be raised pretty quickly, through a $400 million at-the-market stock selling program managed by three investment banks, that will see Nano Nuclear create and sell shares at whatever price it can get.

Is Nano Nuclear stock a buy?

Nano Nuclear stock tumbled on the news. It cost a bit under $42 per share last week -- implying $400 million could be raised pretty easily by selling fewer than 10 million new shares. With 41.5 million shares outstanding at last report, that would probably grow the share count to about 51 million, and dilute existing shareholders by about 23%.

Now that the stock price is falling, Nano might have to sell 1 million more shares to get its full $400 million -- and the stock dilution amount could rise to 25%.

It would be hard to call that good news. But it's not necessarily bad news for investors, either. Nano Nuclear's only burning about $16 million a year right now. At that rate, $400 million in new cash could fund this company's research and development (R&D) work for a couple of decades.

Net-net, I'd call this a positive for a very speculative stock.

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Rich Smith 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.