Please ensure Javascript is enabled for purposes of website accessibility

Why MongoDB Stock Is Down Today

By James Brumley - Jun 30, 2021 at 12:12PM

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 database service provider is raising money it may or may not need.

What happened

Shares of database software company MongoDB (MDB 4.68%) are down 4.4% as of midday Wednesday, following the company's decision to raise funds by selling newly issued stock.

So what

As other organizations have of late, MongoDB is capitalizing on its stock's recent gains by issuing new shares while prices are elevated. The company announced after Tuesday's close it intends to sell 2.3 million new shares of its common stock, but revised that figure to 2.5 million late Tuesday evening. The offering price of $365 per share was less than Tuesday's closing price of $383.71, offering a discount to new buyers. As of the end of January, 60.9 million shares of MongoDB common stock were outstanding.

Man standing on a falling chart, watching it move even lower.

Image source: Getty Images.

Now what

Secondary stock offerings are nothing unusual, particularly in the current environment. Many companies' stocks have soared on hopes for a firm economic recovery, even if the recent past's fiscal results aren't exactly impressive. As the adage goes, opportunity knocks but once. If corporations don't cash in now, they may not be able to again -- at least not this well -- for a long while.

It's not unfair to ask, however, if these dilutive fundraisers are truly necessary. MongoDB will use the proceeds from this sale for "general corporate purposes," which ultimately means they will be used to generate business growth. The company was already on pace to grow its top line by 33% this year, though, and expand it another 30% next fiscal year. Without a clear reason to issue so many new shares (at a discount to the current market price, no less) investors are understandably protesting the deal -- by selling already-issued stock.

Fortunately for all involved, MongoDB's underlying database software story has proven to be consistently a compelling one, buoying the stock following any significant dips like today's.

James Brumley has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends MongoDB. The Motley Fool has a disclosure policy.

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

MongoDB Stock Quote
$356.84 (4.68%) $15.96

*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 analyst team.

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 08/08/2022.

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.