It’s a good-news, bad-news kind of day for Aterian’s (NASDAQ:ATER) investors. In the good-news column, Aterian is expected to generate tens of millions of dollars in gross proceeds from a share sale. The potentially bad news revolves around dilution concerns for Aterian’s current shareholders. All in all, ATER stock traders are anxious and the share price plunged 18% within the first half-hour of the trading session today.
Based in New York, Aterian is known for its cloud-based platform, the Artificial Intelligence Marketplace Ecommerce Engine. This leverages machine learning to facilitate other companies’ product sales.
Aterian has trailing 12-month earnings per share of around -$4.61. Thus, the company hasn’t been profitable over the past year and is apparently taking action to beef up its capital position. In particular, Aterian is enacting a registered direct offering of 10,526,368 shares of the company’s common stock. The company is also offering the same number of warrants to purchase common-stock shares.
Aterian expects this direct offering to close on or around Oct. 4, 2022. Now that you have the basic facts, let’s see how the market reacted to the news.
What’s Happening With ATER Stock?
This morning, traders immediately dumped ATER stock, sending it 18% lower within the first half-hour of the trading day. Consequently, the share price is now closer to $1.50 than $2.
Such a drastic selloff might seem counterintuitive. After all, Aterian stands to gain $20.2 million in gross proceeds from the sale of shares and warrants.
Yet, we must also consider the feelings of Aterian’s current shareholders. They’re probably not too pleased with the prospect of share dilution. They may be concerned that a greater supply of ATER stock shares in circulation means that each share will have a reduced value.
Hence, many of the current stockholders are likely divesting their Aterian shares in frustration, and in anticipation of the dilutive impact of the direct offering. Aterian might have anticipated this result and braced for it. Yet, it stings nonetheless as the company’s investors are dealing with acute short-term losses today.
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On the date of publication, David Moadel 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.