Please ensure Javascript is enabled for purposes of website accessibility

Why Uranium Energy Just Crashed 10%

By Rich Smith - Apr 6, 2021 at 11:12AM

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

Uranium Energy buys -- not mines -- uranium.

What happened

Uranium Energy (UEC 3.92%) describes itself as a U.S.-based uranium mining and exploration company. In a market where uranium prices are soaring, and expected to go up another 67% over the next three years, that sounds like a good business to be in.  

But Uranium Energy stock is going down today, falling 9.8% through 10:50 a.m. EDT. Why is that?

Simple red arrow declining stock chart on a white checked background

Image source: Getty Images.

So what

The problem, it seems, is that Uranium Energy's business is supposed to be mining uranium and selling it at the high prices noted above. But lately, Uranium Energy has been doing a whole lot more buying of uranium than mining and selling the stuff.

Last month, Uranium Energy announced plans to acquire some 1.2 million pounds of U3O8 "yellowcake" uranium oxide. Today, the company said it has contracted to buy 705,000 more pounds of the stuff. Combined with other contracts recently announced, the company says it's now positioned to acquire more than 2.1 million pounds of U3O8 for an average price of $30 per pound.

Now what

To help finance these massive purchases of uranium, Uranium Energy also announced today that it is selling another 3.6 million shares of stock for $3.30 apiece. On the one hand, that's a share price 7% below where Uranium Energy stock closed yesterday -- one good reason for the stock to sell off.

A second reason though, I suspect, is that investors may be wondering why this uranium "miner" is spending so much of its time and energy buying uranium instead of digging up its own and selling it.

That's a good question to ask.

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

Uranium Energy Corp. Stock Quote
Uranium Energy Corp.
$3.58 (3.92%) $0.14

*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 05/17/2022.

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.