Please ensure Javascript is enabled for purposes of website accessibility

Why Skillz Stock Was Going Down Again Today

By Jon Quast - Updated Mar 19, 2021 at 10:35AM

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 company's secondary offering priced far below where the stock was trading.

What happened

Shares of Skillz (SKLZ 6.59%) were going down again on Friday after the company announced the pricing of its secondary stock offering. The offering priced below where shares were trading on the market. As of 10 a.m. EDT, Skillz stock was down almost 11%. 

So what

To be clear, Skillz stock isn't selling off today because of the offering itself. The stock already sold off earlier this week when the offering was first announced. However, at the time, the offering hadn't priced. That's what's new today -- at least 32 million shares will be sold for $24 each. For perspective, Skillz stock was trading around $27 per share when the pricing was announced.

A visibly frustrated man places his hands on his face with a down stock chart in the background.

Image source: Getty Images.

As a reminder, Skillz will only get proceeds from the offering on the 17 million shares it's offering. The rest are being sold by other stakeholders. Furthermore, the offering does allow for the underwriters to sell shares as well -- up to 4.8 million more. However, only the shares offered by Skillz are dilutive to shareholders. Therefore there's minimal dilution of about 4% with this offering.

Now what

Nobody likes to see shareholder dilution. And it would've been better if Skillz could have gotten a price closer to its price on the open market. So it's understandable why the stock has sold off in recent days. However, remember that the company will get around $400 million by doing this. As of the end of the fourth quarter, it had almost $263 million in cash and equivalents and no long-term debt. So $400 million is a very big deal and should go a long way to help this growth stock develop its mobile-gaming platform beyond where it is today.

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

Skillz Inc. Stock Quote
Skillz Inc.
$1.94 (6.59%) $0.12

*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 05/28/2022.

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.