Markets

Why fuboTV Stock Plunged on Friday

What happened

Shares of fuboTV (NYSE: FUBO) traded lower on Friday, with the stock falling as much as 10.1% earlier in the session, ultimately ending the trading day down 8.7%. The streaming video specialist slumped when the company revealed plans to sell $500 million worth of stock.

So what

The news wasn't well received by current investors. With a current market cap of roughly $4.08 billion, the sale could represent dilution of 12.5% for existing shareholders. While seeing the value of your investment diluted is never fun, the potential for a secondary offering shouldn't be a surprise to those who follow fuboTV.

Group of young adults smiling and laughing while watching television and eating popcorn.

Image source: Getty Images.

Soon after its IPO in early October, fuboTV launched a secondary offering of nearly 10 million shares, then representing 15% of the company's common stock. That offering was held to allow early investors and company insiders to sell shares. This was followed by a deal in January to offer roughly 32 million shares in exchange for its convertible preferred stock.

Now what

The news isn't all bad. fuboTV announced record-setting second-quarter financial results on Tuesday. The streaming platform reported record total revenue of $130.9 million, up 196% year over year, partially fueled by ad revenue that grew 281% to $16.5 million. At the same time, paid subscribers soared 138%.

As a result of its stellar performance, management raised fuboTV's full-year revenue guidance to $565 million, which would represent 116% growth at the midpoint of its guidance, up from its prior estimate for a 101% increase. The company also expects its subscriber count to climb to 915,000, up 67% year over year.

fuboTV is a high-growth streaming service spending furiously to fuel the insatiable appetite of its viewers for additional content. This likely won't be the last stock sale.

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Danny Vena has no position in any of the stocks mentioned. The Motley Fool recommends fuboTV, Inc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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