What happened
A day after rising stratospherically, Skillz (SKLZ +0.30%) stock obeyed gravity. At one point on Thursday the stock was down nearly 11%; it ultimately recovered, but still closed the day in negative territory with a 1.5% drop.
So what
That came a day after Skillz announced a sensible and inexpensive acquisition, that of Silicon Valley-based mobile ad specialist Aarki for $150 million in cash and stock. That, combined with a potential short squeeze in the stock, catapulted Skillz shares high in the air on Wednesday.
Image source: Getty Images.
So Thursday's dips look like retrenchments and/or profit-taking. Aarki should end up as a complementary asset that streamlines its new owner's business and saves on costs, but the deal isn't that exciting and the company likely won't be (sorry) a major game-changer for Skillz.
The contrast between Wednesday's bull stampede and Thursday's bear scratch also suggests that there might not be a short squeeze in play after all -- at least, not a sustained one.
Now what
Spurts of interest in new(ish) and young(ish) stocks are not unusual, particularly in the tech universe. At times, certain developments -- like the Aarki deal, or a meaty short-interest figure -- can get blown out of proportion by investors with itchy trigger fingers.
Regardless, Skillz remains a company to watch. Revenue is growing sharply and the company operates in a mobile segment that is nowhere near mature, so it has real potential. Skillz bulls should ignore the noise and stay focused on the company's fundamentals.
