Shares of Velodyne Lidar (NASDAQ:VLDR) soared more than 40% this morning on reports that Amazon (NASDAQ:AMZN) has made an investment in the light detection and ranging technology company.
So what do you need to know about the news sending VLDR stock higher?
According to the reports, an Amazon subsidiary has acquired a warrant for 39.6 million shares of Velodyne Lidar, which makes sensors for self-driving vehicles. At one point in after-hours trading, VLDR stock was up 88% to $7.09 per share.
This comes as shared closed out Feb. 7 at $3.77, down 23% year to date.
What Happened With VLDR Stock
Amazon.com NV Investment Holdings, a wholly owned subsidiary of Amazon, can exercise this warrant at $4.18 per share. The deadline for it to do so is Feb. 4, 2030. Over time, this subsidiary will make payments to Velodyne Lidar to vest the shares, totaling up to $200 million.
Additionally, once the subsidiary has exercised the warrant for at least 12.3 million shares, it can appoint a board observer.
The investment supports Amazon’s push into autonomous vehicles. The e-commerce giant owns a self-driving vehicle unit called Zoox that is developing robotaxis and other autonomous vehicles. Amazon has also been experimenting with delivery drones to bring packages to the doors of consumers.
Why It Matters
The Amazon investment is good news for Velodyne Lidar and its shareholders. VLDR stock has declined 84% in the last 12 months and now trade as a penny stock. The steep drop in value comes amid conflict with management, as well as the resignation of Velodyne Lidar’s former CEO Anand Gopalan last July.
For Amazon, the strategic investment could help to advance its autonomous vehicle and drone units as it seeks to use the technology with its delivery fleet that today numbers 400,000 drivers, as well as 40,000 semi-trucks, 30,000 vans and more than 70 airplanes. Amazon has made it known that it plans to significantly upgrade its delivery fleet with self-driving and electric vehicles.
What’s Next for Velodyne Lidar
VLDR stock is getting a big lift higher today on news of the Amazon stake. However, today’s gain only erases about half the losses in the company’s share price over the past year. Going forward, Velodyne Lidar will have to fix itself internally and demonstrate to investors that it has a manageable plan of action for its share price to appreciate over the long term.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
