Why Symbotic Stock Plunged Today
Key Points
Symbotic is looking to capitalize on its recent success with a secondary stock sale.
The recent price surge presents the company with a perfect opportunity to raise capital without taking on debt.
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Shares of Symbotic (NASDAQ: SYM) slumped out of the gate Thursday morning, falling as much as 16.4%. As of 10:39 a.m. ET, the stock was still down 15.3%.
The catalyst that sent the artificial intelligence (AI) and warehouse automation specialist tumbling was a secondary stock sale.
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Taking stock
After reporting blockbuster results last week that sent the stock to a new all-time high, Symbotic sought to capitalize on its current success with a secondary stock sale. In a regulatory filing with the Securities and Exchange Commission (SEC) after the market close on Wednesday, the company said it will offer 10 million shares of stock -- but the devil's in the details. The company will offer 6.5 million shares of its Class A common stock, while Softbank -- an early investor -- will offer up to 3.5 million shares.
It's important to view this seemingly significant stock sale in context. Symbotic had a total of 113,614,046 Class A shares outstanding as of market close on Nov. 21, so the stock sale will dilute existing shareholders by less than 6% -- far less than the stock's 15% plunge today. Conducting a secondary while the stock sits near an all-time high gives management a way to raise capital without having to take on debt.
Furthermore, while the sale of stock by Softbank might be concerning, they, too, are looking to capitalize on their investment, which the company and its affiliates made nearly four years ago, before Symbotic went public.
What's next for Symbotic
Management increased its guidance following the company's recent blockbuster financial results, so by all accounts, the future looks bright. Symbotic's AI-powered warehouse automation systems help save customers time and money, making it almost table stakes for e-commerce players.
A look at the stock chart, however, helps provide some much-needed context behind the decline. Symbotic stock had surged 260% year-to-date heading into this week, so some investors were looking for any excuse to take some profits off the table.
Additionally, the stock's valuation isn't as compelling as it was at the start of the year, but at roughly 3 times forward sales, Symbotic is certainly intriguing.
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Danny Vena, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Symbotic. The Motley Fool has a disclosure policy.
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