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Why Shares of Lantronix Fell Sharply on Thursday

By Daniel Sparks – Nov 18, 2021 at 4:18PM

Key Points

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A stock offering seems to have spooked some investors.

What happened

Shares of Internet of Things (IoT) solutions company Lantronix (LTRX -1.98%) took a hit on Thursday. Shares fell as much as 16.2%. But as of about 3:30 p.m. ET, the stock was down 11.3%.

The growth stock's decline was likely due to news that Lantronix was issuing stock to raise capital.

A chart showing a stock price decclining.

Image source: Getty Images.

So what

On Wednesday afternoon, Lantronix said it would issue stock as part of an offering to raise proceeds to be used for "working capital and general corporate purposes, which may include, among other things, the repayment of existing indebtedness."

On Thursday morning, the company said it priced the offering of 4.7 million shares at $7.50 per share. In addition, underwriters were given an option to purchase up to 705,000 shares of the company's stock within 30 days at the same price.

Now what

Investors may be disappointed in the capital raise because it dilutes shareholder ownership. In general, shareholders typically want a company to be able to generate enough operating cash flow to fund growth investments with internal funds.

While Lantronix's revenue in its most recent quarter grew 62% year over year, its loss per share for the period widened from a $0.01 loss in the year-ago period to a loss of $0.08. The company's cash balance at the end of its most recent quarter was $10.3 million.

For the full year of fiscal 2022, Lantronix expects revenue to increase 54% to 75% year over year, with its adjusted earnings per share growing 95% to 135% year over year.

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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