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Why fuboTV Stock Fell Sharply on Thursday

By Daniel Sparks - Jan 28, 2021 at 5:23PM

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The tech company's $350 million convertible debt offering may have spooked some investors.

What happened

Shares of fuboTV (FUBO 3.68%), a sports-first live-streaming platform, took a hit on Thursday, falling 15%.

The growth stock's decline may be due to skittishness from investors following sharp gains for many highly shorted stocks (including fuboTV) earlier this week.

In addition, fuboTV's announcement on Thursday morning that it was raising $350 million of capital via convertible senior notes may have concerned some investors.

fuboTV interface displayed on a TV, a tablet, and a smartphone

Image source: fuboTV.

So what

Some market participants seemed to be targeting stocks with significant short interest as part of an effort to create a short squeeze, with fuboTV among them. A short squeeze refers to when investors who are short a stock are forced to cover their position (buy the stock to cancel out their short position). The drop in fuboTV shares today may be due to some of the hype around this trading scheme cooling off.

More specifically related to fuboTV's business, the company notably announced a plan to offer $350 million of convertible notes in a private offering. New debt is often viewed by investors as a factor that increases risks to a company's capital structure. Furthermore, since this debt is convertible to equity, it can lead to dilution of shareholders' ownership if it is converted.

Now what

"fuboTV intends to use the net proceeds from the offering for general corporate purposes, including working capital, business development, sales and marketing activities, capital expenditures, repayment of outstanding debt, potential acquisitions and strategic transactions," fuboTV said in a press release about the offering. However, management noted that the company "has no current agreements with respect to any material acquisition or strategic transaction."

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fuboTV, Inc. Stock Quote
fuboTV, Inc.
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