Why Kandi Stock was crashed today
Kandi Technologies (NASDAQ: KNDI) Kandi was crushed in Tuesday’s trading, ending the day 22.7% lower.
The Chinese electric car maker has a market cap of just $ 328 million and has just announced plans to sell $ 60 million of shares and warrants (to buy shares) as part of a private placement – enough to dilute existing shareholders on almost 15% of their stake.
Specifically, Kandi says he will sell 9.4 million shares to institutional investors at a price of $ 6.38 per share. In addition to the shares, these institutional investors will receive warrants to purchase an additional 3.8 million shares at an exercise price of $ 8.18 each.
Now, at this price, it is possible that these warrants will never be exercised. (Kandi closed trading today at just $ 6.01, so there is little reason to exercise warrants until the stock price is well above $ 8.) If they are exercised , however, this will mean that two things have happened:
Firstly, Kandi’s stock will have risen a lot (which is a good thing) and secondly, shareholders will find themselves diluted on an additional 5.6% of their stake (which is a bad thing).
Kandi’s timing on this announcement is curious, as just in the last quarter, Kandi announced its first free movement of capital in one year, generating an actual cash profit of $ 19.1 million. The timing is also likely disappointing for investors who, seeing free cash flow turning positive, may have concluded that Kandi is now making money on his own and may not need to use dilutive stock offerings to generate the cash it needs in the future.
On the other hand, the Kandi stock had appreciated by only 50% from the end of October to the end of last week. With ratings this high, one can hardly blame Kandi for looting the cookie jar, sell stock, and raising some extra cash when its share price was high.
Investors can only hope that it was worth it and that Kandi will now put their extra cash to use to grow the business.
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