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Why SOS Limited Stock Plunged Today

By Jon Quast - Mar 30, 2021 at 5:42PM

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The stock could keep falling if management keeps diluting shareholders at this pace.

What happened

Shares of SOS Limited (SOS -4.52%) plunged on Tuesday after the company announced a substantial stock offering. Many other cryptocurrency stocks rose for the session because Bitcoin was trading higher. However, the stock offering was too much for SOS to overcome, and it finished the day down almost 11%.

So what

To be more specific, as an international stock, SOS Limited trades in the U.S. as American depository receipts (ADR), which not technically common shares. In the press release from the company, management said it's selling 25 million ADRs and 25 million warrants. The company is selling an ADR and warrant for $5 each, which is below where ADRs traded on the open market at the time. The warrants also have an exercise price of $5.

A red arrow rising over a city skyline breaks near the top resulting in the tip of the arrow pointing down.

Image source: Getty Images.

Between the dilution to current shareholders and the lackluster pricing of the offering, it's not surprising to see SOS stock sell off today. However, on the bright side, the company should gross $125 million if all warrants are exercised.

Now what

Stocks are volatile in the short term, which is why it's a good idea to not focus on the price per share (or in this case, the price per ADR) day by day. It's better to focus on business results and expect the price to reflect those results in due time.

When it comes to focusing on SOS's business, investors need to be aware that the investor relations website isn't always up to date. Therefore, be sure to check the Securities and Exchange Commission (SEC) website for updated filings from SOS. And PR Newswire is a good source for official company press releases.

SOS shareholders will definitely want to keep up with developments for the company. Investors may see promise in the cryptocurrency and blockchain services the company is pursuing. But to develop these services, it's been raising cash by diluting shareholders at an alarming rate. For perspective, the company started the year with about 35 million ADRs outstanding and has since done multiple new offerings. Today's offering alone is more than its total at the start of 2021.

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Stocks Mentioned

SOS Limited Stock Quote
SOS Limited
$0.39 (-4.52%) $0.02
Bitcoin Stock Quote
$29,014.42 (-4.90%) $-1,494.46

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

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