Key Points
Shares of NuScale (NYSE: SMR) fell this week, finishing down 18.8%. The drop comes as the S&P 500 and the Nasdaq-100 lost 0.3% and 0.5%, respectively.
The nuclear energy company and developer of small modular reactors (SMRs) is seeing its shares pressured by major selling from one of its largest shareholders.
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Fluor is selling SMR stock
Engineering and construction company Fluor was an early investor in NuScale and is one of its largest shareholders. The two companies entered an agreement last month in which a significant portion of Fluor's Class B shares was converted into Class A shares, NuScale's common stock. The agreement included a 30-day lock-up, initially preventing Flour from selling its newly converted shares, but near the end of last week, Flour sold nearly $100 million worth after the deadline passed.
The influx of new shares to the market, and the expectation that hundreds of millions of dollars' worth of shares could be sold over the next two years, is sending NuScale stock lower. Investors are also weighing the news that Goldman Sachs initiated coverage for NuScale rival Oklo this week with a neutral rating.
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NuScale's valuation is steep
I believe investors are getting ahead of themselves. The company's market capitalization of more than $10 billion is substantial, considering the technology is unproven and the company's revenue is currently extremely modest.
Still, for investors with a higher risk tolerance, NuScale can be a solid pick. Nuclear energy is having a renaissance of sorts, and the opportunity for NuScale could be massive. Just know it's a long road to profitability, and a lot of risks lie ahead.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.