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Here's Why Ebang International Stock Got Crushed Today

By Jon Quast - Mar 4, 2021 at 2:35PM

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While shareholder dilution could be fueling fear from investors, Ebang management is subtly communicating its bullish outlook.

What happened

Shares of Ebang International Holdings (EBON 0.39%) got crushed on Thursday, along with many other high-flying stocks. As of 2 p.m. EST, Ebang stock was down a whopping 24%.

So what

On one hand, I wouldn't read too much into Ebang's fall today. After all, it's hard to find many stocks that are up now that fear is rising on Wall Street. Good companies and bad companies are selling off alike today, so Ebang's 24% decline isn't indicative of its business fundamentals. That said, we should at least acknowledge recent developments for the company.

A falling red arrow crashes through the floor as a businessman looks on.

Image source: Getty Images.

In March, Ebang registered 13.6 million new shares of its common stock. In so doing, it offered warrants to certain investors. These investors can exercise their warrants to buy these shares at $11.06 each. If exercised, Ebang will get about $150 million in gross proceeds -- cash it can use for its business. While good, it does dilute shareholder value. And this might be seen as an extra reason to sell Ebang stock on a down day for the market.

Now what

If there's a silver lining here, it's that Ebang's warrants exercise at a price of $11.06 per share. Previously, the company issued warrants with exercise prices of just $5.25 per share and $5.50 per share. Also, in recent weeks, I've observed many international stocks offering warrants with an exercise price far below where its common stock was trading. At least with this offering, Ebang management is communicating a little bit of bullishness, apparently believing its stock can climb much higher than where it is trading right now.

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Stocks Mentioned

Ebang International Holdings Inc. Stock Quote
Ebang International Holdings Inc.
EBON
$0.74 (0.39%) $0.00

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