What happened
Innoviz Technologies (NASDAQ: INVZ) is raising cash by selling stock, and investors are disappointed with the terms. Shares of the auto tech company traded down about 25% on Thursday after the secondary offering was concluded.
So what
Innoviz is one of several companies developing light detection and ranging (lidar) tech, one of the core components of self-driving cars and driver-assist features. The company's sensors use lasers to detect objects in the surrounding area.
Overnight, the Israeli company announced it would sell 26 million shares into the market at $2.50 each, raising about $65 million before expenses, to be used for general corporate purposes.
These secondaries tend to have an impact on the stock price for two reasons. First, as typical, Innoviz is selling the stock at a significant discount to the $3.14 Wednesday closing price to make sure the deal gets done.
Second, the 65 million new shares add significantly to the 111.84 million shares available for trading. The added supply without any new catalyst for added demand tends to put pressure on the share price, at least in the near term.
Now what
The secondary offering reverses a good post-earnings run for the stock, and leaves Innoviz shares down more than 50% for the year and down 81% from their all-time high set in late 2020.
It is a tough day for Innoviz shareholders, but long-term holders still have reason for hope. There are a lot of believers in the company's products and its potential for oversize growth. The secondary offering, while tough for existing holders to swallow today, adds to Innoviz's cash reserves and helps ensure the company is able to follow through on its potential.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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