Please ensure Javascript is enabled for purposes of website accessibility

Why Rekor Systems Stock Dropped Then Jumped Friday

By Howard Smith - Feb 5, 2021 at 5:09PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The provider of AI solutions priced a new stock offering, and investors didn't know which way to go from there.

What happened

Shares of Rekor Systems (REKR -1.59%) went on a bit of a roller-coaster ride on Friday. After initially dropping 11%, the stock ripped 15.5% above Thursday's close before ending Friday's session 8% higher. 

So what

Prior to the market open, Rekor Systems announced the pricing of a previously announced common stock offering. Priced at $12.25 per share, the offering price represented a 17.5% discount from Thursday's closing share price. But investors shrugged off the lower price as it was still more than 50% higher than where the stock began the year. Investors felt the $65 million in proceeds will be a long-term benefit to the business. 

Metropolitan highway traffic with superimposed artificial intelligence symbols.

Image source: Getty Images.

Now what

Rekor said it will be using the proceeds for general corporate purposes but added in a statement it "may also use a portion of the net proceeds for acquisitions or strategic investments in complementary businesses, products, services or technologies, including companies that might benefit from the use of our technology."

Rekor Systems provides government and commercial customers with license-plate recognition systems and traffic monitoring of artificial intelligence (AI)-enabled roadways. Its technology is also used by retailers to conduct efficient, contactless transactions. 

Shares have risen 300% since the company reported third-quarter earnings in November 2020. At that time, it announced that year-to-date earnings had grown 60% over the prior-year period. The company retired its remaining high-interest debt obligations and resolved an intellectual property-rights dispute with no material impacts. 

Rekor Systems' AI-based platforms are in high demand as companies and municipalities increasingly utilize "smart" technologies. Investors must feel the capital the company most recently raised will be put to good use to continue growing the business. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Rekor Systems, Inc. Stock Quote
Rekor Systems, Inc.
$2.48 (-1.59%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.