Oklo Shares Dropped 30% in Just One Week. Danger Sign or Buying Opportunity?

Two weeks ago, the stock price of nuclear start-up Oklo (NYSE: OKLO) hit an all-time high of $174 per share, in spite of a lack of recent news about the company. But over the course of the next week: yikes. Shares tumbled a staggering 31% -- again on no news whatsoever -- to $120 per share.

Is this the beginning of a more serious sell-off for the early stage company? Or should investors take the opportunity to buy the dip?

No news is good news

It's ironic that Oklo's shares moved so much despite a lack of news, because the company's recent news -- all positive -- has had a much more modest impact on its share price.

On Oct. 1, the U.S. Department of Energy announced that Oklo was one of four companies selected for its Advanced Nuclear Fuel Line Pilot Projects, which are designed to accelerate the permitting and construction of facilities that fabricate nuclear fuel for advanced reactors. Oklo will build and operate three such facilities under the program. The day after that announcement, Oklo's shares rose 11%, but it would go on to rise an additional 30% between Oct. 7 and 14, on no news.

Similarly, on Oct. 17, Oklo announced it had signed a joint agreement with European reactor developer Newcleo to develop advanced fuel fabrication and manufacturing infrastructure in the U.S. Newcleo plans to invest "up to $2 billion" in the project, which could include repurposing surplus plutonium. Swedish nuclear developer Blykalla has also expressed an interest in co-investing. The trading day after that news broke, Oklo's shares declined by 2.7%, but they'd drop another 24.5% between Oct. 20 and 22 on no company news.

Image source: Getty Images.

What's really going on

It's often hard to pinpoint a cause when a stock drops on no news. Oklo has almost 150 million shares outstanding, and thousands of them are traded every day for a variety of reasons. Because the company is still in the pre-commercial stage, there are no financials or operational metrics for investors to consult, so the only information investors have to inform their decisions is news from the company or news about the nuclear industry generally, and looking at what other investors are doing.

When a company with no revenue or net income has soared the way Oklo had as of Oct. 14 -- shares were up 720% year to date -- it's likely that some investors decided to take some profits and sold some of their shares. One notable investor in particular sold shares in Oklo on Oct. 20: ARK Invest's Cathie Wood. Her Ark Autonomous Technology & Robotics ETF sold 53,353 Oklo shares, about one-third of its total position. That likely prompted other investors to follow suit.

It's worth noting that the Ark Autonomous Technology & Robotics ETF still has a $14.7 million position in Oklo, so it doesn't seem like Cathie Wood has lost confidence in the company's prospects.

Ups and downs

Although Oklo's stock has been on an upward trajectory, particularly this year, it's been very volatile, especially over the past two months as the company has received some important votes of confidence from the U.S. Department of Energy and has broken ground on its first Aurora Powerhouse small modular reactor site. Investing in such a speculative and volatile stock is always going to be risky, and investors should be prepared for wild price swings if they buy in now.

While Oklo's stock price is certainly cheaper than it was on Oct. 14, it's still not particularly "cheap," given the company's $19.5 billion market cap and lack of revenue or profits. Essentially, the stock is a binary gamble on whether the company's technology can perform as expected. If Oklo comes through, the stock is likely to reach new heights. If it fails, the stock will almost certainly tank.

I'm bullish on the company's science, but in the world of experimental physics, a lot can go wrong. I would still consider investing at this price, but only if I had very high tolerance for risk.

John Bromels has positions in Oklo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.