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Why Skillz Sank Then Inched up Higher on Monday

By Eric Volkman – Aug 23, 2021 at 5:46PM

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A pile of new shares deriving from a recent acquisition are about to be issued.

What happened

Skillz (SKLZ -0.56%) stock dipped slightly in early trading Monday before eventually clawing to a nearly 2.4% gain at today's close . With no other price-moving news from the company, it seems likely this was due to a revised share-issue prospectus filed by the mobile games platform operator that morning.

So what

Skillz's new prospectus didn't differ substantially from its predecessor, which was filed last week. In both, the company revealed that a group of selling stockholders "may from time to time" divest up to a total of slightly over 4.4 million shares of its common stock. If effected, these sales will occur via private placements.

Young person triumphantly looking at a smartphone.

Image source: Getty Images.

The company emphasized that since it is not the entity selling the stock, it will earn no proceeds from the issue. It did add, with little elaboration, that it will "pay the expenses, other than any underwriting discounts and commissions, associated with the sale." 

The shares, which haven't yet been issued, derive from the company's deal to acquire digital advertising specialist Aarki for $150 million in a cash-and-stock deal announced in June. The 4.4 million-plus new shares are the equity component of the arrangement.

Now what

Nobody likes it when their stock is diluted. But perhaps on reflection, Skillz investors realized that this issue isn't very dilutive at all, as the tech company has over 334 million shares outstanding.

Additionally, many probably consider Aarki to be a good fit for their company, inexpensive at that $150 million cash-and-stock price tag and potentially a strong contributor to future fundamentals.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skillz Inc. The Motley Fool has a disclosure policy.

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