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Why Ontrak Stock Jumped Today

By Evan Niu, CFA – Aug 20, 2020 at 12:56PM

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The healthcare company is planning a public offering of a new preferred stock.

What happened

Shares of Ontrak (OTRK -6.37%) have jumped today, up by 15% as of noon EDT, after the company announced a stock offering. The healthcare specialist is selling non-convertible perpetual preferred stock to public investors.

So what

Ontrak is kicking off a public offering of the Series A Cumulative Perpetual Preferred Stock, which will have a liquidation preference of $25 per share. The company, which utilizes artificial intelligence (AI) to help provide telehealth services to patients, has not yet specified how much money it is looking to raise from the deal, but underwriters will have an option to purchase an additional 15% of however many shares are issued and sold to the public.

Patient using a tablet to videoconference with a doctor

Image source: Getty Images.

The dividend yield on the shares also hasn't been determined yet. Cumulative preferred stock entitles shareholders to receive any dividend payments that the issuer may have missed in the past. Dividends continue to cumulatively accrue until the company pays out all that is owed. This class takes priority over all other types of shareholders, including other preferred stock.

Now what

In the event that the company is forced to liquidate, the investors will be able to receive the $25 liquidation preference in addition to any accumulated and unpaid dividends. Ontrak plans to use the proceeds from the offering to cover the first two years of quarterly dividend payments to the Series A Preferred Stock, with remaining net proceeds being used for general corporate purposes.

Investors seem encouraged that Ontrak is raising non-dilutive capital to bolster its working capital, which was just $2.6 million last quarter. The Series A Preferred Stock will be listed on the Nasdaq and trade under the symbol "OTRKP."

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

Stocks Mentioned

Ontrak, Inc. Stock Quote
Ontrak, Inc.
OTRK
$0.36 (-6.37%) $0.02

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