Market

Why Porch Group Stock Collapsed on Monday | The Motley Fool

What happened

Shares of Porch Group (NASDAQ:PRCH) fell sharply on Monday morning. The cloud-based provider of homebuyer and homeowner services stumbled out of the gate, falling as much as 16.3% in early trading. As of 2:23 p.m. EDT, the shares were still down 15.7% compared with Friday’s closing price.

Investors seemed concerned as Porch Group announced plans to raise capital by selling convertible notes. 

So what

The company said it would offer $350 million in convertible senior notes due in 2026 in a private sale to “qualified institutional buyers.” Additionally, Porch Group said the buyers will have the option to purchase up to an additional $52.5 million in notes within 30 days. Holders of these obligations will have the option to convert them to cash, common stock, or a combination of the two.

The potential for dilution is no doubt on the minds of current shareholders, but the news isn’t all bad. Porch will enter into privately negotiated “capped call” transactions with one or more of the buyers. The purpose of these deals is to “reduce the potential dilution to the common stock” that can occur and offset the amount of any cash payments that Porch Group will be required to pay out to the holders of the notes.

Now what

The company will use some of the proceeds from the offering to pay for the capped call, with the remainder to pay off Porch Group’s term loan and for the oft-cited “general corporate purposes.”

This fundraising shouldn’t be too much of a surprise to those that have been paying attention. Porch has made no secret of its growth-by-acquisition strategy, adding two new companies to its stable just last week. With that as a backdrop, this likely won’t be the last time Porch Group goes back to the well to raise money.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



Most Related Links :
newsbinding Governmental News Finance News

Source link

Back to top button