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Why Twilio, Inc. Stock Plunged Today

By Steve Symington – Updated Oct 10, 2016 at 2:15PM

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A dilutive secondary offering has investors in the cloud communications specialist feeling gloomy.


What happened

Shares of Twilio Inc. (TWLO 5.14%) plunged 14.1% Monday, after the cloud communications specialist filed for a follow-on public offering of common stock.

So what

More specifically late Friday, a Twilio SEC filing showed it's proposing a follow-on public offering of $400 million in class A common shares. Around $50 million of those shares will be sold by the company, with the remainder being offered by selling stockholders. Twilio will not receive any proceeds from the sale offered by those selling stockholders. 

Now what

Considering Twilio stock has also more than tripled since its IPO (at $15 per share) in June -- including a mind-boggling 91.9% jump in its first day trading -- it's not terribly surprising that Twilio and its selling stockholders are feeling opportunistic.

But with Twilio's entire market capitalization standing at just $4.4 billion as of this writing, the $400 million offering will also represent significant dilution for existing shareholders, so it's easy to see why the stock is pulling back hard today. 

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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