Why Upstart Stock crashed today

What happened

Actions of Holdings reached (NASDAQ: UPST), the cloud-based artificial intelligence-based lending platform, fell on Wednesday to end the session down 12.6%. The company had only itself to blame after announcing plans that would lead to stock dilution.

So what

After watching the course of its action soar to six times in value within four months of his IPO in December, Upstart decided to cash in last night. The fintech announced that it would sell at least 2 million new common shares and up to 2.3 million.

Upstart said it will use the proceeds for general corporate purposes.

Now what

Upstart has not yet announced the sale price of the shares, so it is not yet clear how much that proceeds will amount to. Investors should be prepared to see a second wave of selling pressure, however, if Upstart prices too far below the around $ 126 level at which the shares closed on Wednesday.

And it’s a warning shareholders probably don’t want to hear, on a day the company just suffered a 12% sale in response to news of just 3%. dilution of shares. But with Upstart shares selling over 38 times sales (not to mention profits) even after today’s sell off, the next step could be another doozy.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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