Why Does Planet Labs Stock Keep Going Down?
Key Points
Planet Labs plans to redeem its outstanding warrants.
It's unknown how may warrants remain -- but probably not more than 12.8 million.
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Planet Labs (NYSE: PL) stock tumbled 9.7% through 1:05 p.m. ET Monday, its third straight trading day of declines, after announcing Friday that it will redeem all of its outstanding public warrants.
The move promises to increase the number of shares of Planet Labs outstanding if it prompts warrant holders to exercise their warrants rather than allowing them to be redeemed.
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Planet Lab's warrant redemption
The warrants in question give their holders the right to purchase Planet Labs shares at $11.50 per share upon exercise. Warrant holders have until 5 p.m. ET on April 27, 2026, to exercise this right; if they fail to do so, Planet Labs will have the right to repurchase them at $0.01 per warrant.
Considering that Planet Labs stock currently costs roughly $28 a share, and that exercise will yield an immediate $16.50 per share profit, it's likely any warrant holder that's paying attention will choose to take the profit rather than the $0.01 redemption offer.
Let's assume this is what happens. So what happens next?
What happens next
Planet Labs did not say how many warrants remain outstanding today. SEC filings, however, show that at one point, warrants were outstanding, sufficient to buy 12,833,315 shares. Assuming this is still the case and that all warrant holders exercise their rights to buy shares, this could yield as much as $211.2 million in new cash for Planet Labs -- and create 12.8 million new shares outstanding.
Added to the 322.7 million shares currently outstanding, this would grow the share count to 335.5 million and dilute existing shareholders by only 4%.
Given this, and given that these warrants were certainly going to get exercised sometime in any case, today's 10% sell-off in Planet Labs stock seems an overreaction.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Planet Labs PBC. The Motley Fool has a disclosure policy.
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