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Why Stock Lost 18% in November

By Jeremy Bowman – Dec 7, 2021 at 10:29AM

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An insider sale triggered a sell-off in the AI stock.

What happened (AI 4.62%), an AI-focused software-as-a-service (SaaS) company, was sliding again in November as a large insider sale seemed to trigger a wave of selling and because of broader headwinds against growth stocks over concerns about tightening monetary policy and rising interest rates. As a result, the stock fell 18% last month, according to data from S&P Global Market Intelligence

As you can see from the chart below, most of the stock's decline came over a few sessions in the middle of the month.

AI Chart

AI data by YCharts

So what's worst day of the month came on Nov. 18, when the stock fell 11%. The culprit was insider selling by CEO Thomas Siebel, who dumped approximately 600,000 shares, or roughly $30 million worth of stock at the time. That move triggered alarm bells among some holders, as it seemed to indicate Siebel's lack of confidence in the stock, especially after shares had fallen by nearly 75% at that point from their all-time high back in February. 

An AI hand touching a human-looking hand

Image source: Getty Images.

In reality, there are a lot of reasons why an insider might sell, including the need for money for something else, but the stock sale is not a good look for Siebel or the company, especially with most shareholders in the red. The stock soared in its IPO in late 2020 in a wave of euphoria for growth stocks, but it then spent much of this year steadily declining as investors adjusted for an overinflated valuation and as market sentiment turned away from the biggest growth stock winners of the pandemic.

Now what 

Investors' fears seemed to be confirmed when the company reported fiscal second-quarter earnings on Dec. 1 and the stock fell 11% even though the results beat estimates. said revenue increased 41% to $58.3 million, which topped the consensus at $56.9 million, and customer count increased by 63% to 104. On the bottom line, the company reported an adjusted loss of $23.6 million or $0.23 per share, which was ahead of estimates of a loss of $0.28 per share.

In its guidance, management called for full-year revenue of $248 million to $251 million, which represents 36% growth at the midpoint. Despite the solid results, investors sold off the stock, as subscription revenue was weaker than overall revenue growth. Bank of America also downgraded the stock, noting that remaining performance obligations declined sequentially, excluding the expansion of its relationship with Baker Hughes, its biggest customer.

While this AI stock looks much more affordable now than it did a few months ago, market sentiment has shifted, and management will now have to convince investors that it can execute on the market opportunity in front of it.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends, Inc. The Motley Fool has a disclosure policy.

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