Why Upstart Stock Crashed Today

What happened

Shares of Upstart Holdings (NASDAQ: UPST), the artificial-intelligence powered, cloud-based lending platform, plummeted Wednesday to close the session down 12.6%. The company had only itself to blame after announcing plans that will cause stock dilution.

So what

After watching its stock price surge to six times in value in the four months since its December IPO, Upstart decided to cash in last night. The fintech announced it will sell at least 2 million new shares of common stock, and as many as 2.3 million.

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

Now what

Upstart has not yet announced the shares’ sale price, so it’s not yet clear how much those proceeds will be. Investors should be prepared to see a second wave of selling pressure, though, if Upstart sets the price too far below the approximately $126 level at which shares closed Wednesday.

And that’s a warning shareholders probably don’t want to hear, on a day when the company just suffered a 12% sell-off in response to news of just 3% stock dilution. But with Upstart stock selling for more than 38 times sales (let alone earnings) even after today’s sell-off, the next step down could be another doozy.

10 stocks we like better than Upstart Holdings, Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Upstart Holdings, Inc. wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of February 24, 2021

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Upstart Holdings, Inc.. The Motley Fool has a disclosure policy.

You May Also Like

About the Author: Over 50 Finance