Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Ebang International Stock Got Crushed Today

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

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

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.

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

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

*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 05/16/2022.

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.