LKCO

Why Luokung Technology Stock Plunged Today

What happened

Luokung Technology's (NASDAQ: LKCO) stock price fell 26% on Wednesday after the Chinese provider of location-based services for autonomous vehicles announced a massive stock offering.

So what

Luokung's shares more than quadrupled in value after its acquisition candidate, eMapgo Technologies, said on Feb. 4 that it would work with Beijing New Energy Automobile to co-develop mapping services for electric vehicles.

A person is pointing to a stock chart that rises sharply and then falls.

Luokung Technology gave up some of its recent gains on Wednesday. Image source: Getty Images.

This morning, Luokung moved to cash in on its recent share price gains by conducting a $100 million direct offering. Luokung will sell nearly 48.1 million shares to investors at $2.08 per share. The offering price was more than 30% below the stock's closing price on Tuesday, and Luokung's shares fell in kind.

Moreover, the deal included warrants giving investors the right to purchase an additional 19.2 million shares at an exercise price of $2.38 per share over a three-year period.

Now what

The sheer size of the stock offering likely spooked Luokung's existing shareholders, who will now see their ownership stakes diluted by the newly created shares -- and potentially even more so if the warrants are eventually exercised. The price at which Luokung decided to sell its stock also didn't help matters, and it no doubt played a part in many shareholders' decisions to sell their shares today.

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Joe Tenebruso 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.

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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