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Why Rekor Systems Stock Dropped Then Jumped Friday

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

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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. 

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Rekor Systems, Inc. Stock Quote
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