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New: Introducing “Why Is It Moving?” - lightning-fast, AI-driven explanations of stock moves
Serve Robotics stock has surged 52% in October.
Now Serve will sell 6.25 million shares to raise $100 million in cash.
Yesterday's DoorDash announcement looks perfectly timed to inflate the stock's price in time for the sale.
What goes up, must come down -- but did Serve Robotics (NASDAQ: SERV) stock have to come back down so quickly?
Yesterday, the provider of autonomous food delivery robots for delivering takeout surged on news of a partnership with food delivery giant DoorDash, rising 29% in a day. Problem is, Serve appears to have planned ahead for this event -- maybe even counted on it -- and today Serve announced it will capitalize on its new and improved stock price by running a $100 million registered direct offering of common stock.
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Now Serve stock is selling off by 9.6% through 9:55 a.m. ET.
Image source: Getty Images.
Building on momentum from an earlier press release, announcing it passed 1,000 delivery robots in service, Serve stock is up 52% since the start of October, making now a great time to convert some high-priced stock into cash to fund Serve's money-losing operations ($34 million lost so far this year).
This is exactly what Serve is doing.
The company plans to sell 6.25 million shares to "certain institutional investors" at a share price of $16 each. Current shareholders quickly sold off Serve stock to almost precisely $16 this morning in response.
Why is Serve selling shares (I mean, aside from the obvious reason that it can get a lot more cash for them)?
"The Company intends to use net proceeds from the offering for general corporate purposes, including working capital." Simply put, Serve has little revenue (less than $2 million collected last year) coming in, which is why its losses are so large. To keep the business running, Serve needed to find cash somewhere.
It's raising cash now and diluting its existing shareholders because it has no other choice.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DoorDash and Serve Robotics. The Motley Fool has a disclosure policy.
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