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Why Agora Stock Popped Today

By Evan Niu, CFA - Feb 1, 2021 at 11:47AM

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The Chinese tech company raised $250 million through a private placement.

What happened

Shares of Agora (API 0.00%) have popped today, up by 25% as of 11:10 a.m. EST, after the company announced that it had raised capital through a private placement. Agora is raising $250 million in fresh cash. Existing shareholders will be diluted by approximately 4.5%.

So what

The Chinese tech company, which operates a real-time engagement platform, said that an accredited investor had agreed to purchase newly issued Class A shares through the private placement. Agora did not specify who the investor is, but the company's three largest institutional shareholders are Dragoneer Investment Group, BlackRock, and Capital World Investors.

Green stock chart going up

Image source: Getty Images.

Agora recently announced that it will acquire Easemob, which provides instant messaging application programming interfaces (APIs), in an all-cash transaction for an undisclosed sum. The cash raised from the private placement could help fund that acquisition.

Now what

Agora has been enjoying strong growth but continues to burn cash as it invests in future growth. The company finished the third quarter with $635.4 million in cash, while free cash flow was negative $5.1 million, worse than the negative $1.3 million in the third quarter of 2019. Agora went public last summer, raising nearly $500 million through its IPO.

The company has not yet scheduled its fourth-quarter earnings release but expects revenue for 2020 to be in the range of $125 million to $130 million. That translates into a fourth-quarter revenue forecast of $24.7 million to $29.7 million. Analysts are modeling  for $31 million in sales.

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