What happened
Rockley Photonics (RKLY) shareholders trailed the market by a wide margin on Wednesday as the stock sank 22% by 11:15 a.m. ET. The wider market was up 0.7% by that time. The health monitoring tech specialist reduced its short-term outlook after canceling a planned sale of part of its business.
So what
Rockley announced late on Tuesday that it is not going forward with its planned sale to China-based Jiangsu Hengtong Opti-Electric. The deal would have divested its communication technology while allowing Rockley to focus on its photonic health monitoring devices and solutions. The proposed deal hit a regulatory challenge.
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"We continue to fully comply with the regulations," CEO Andrew Rickman said in a press release, "and have decided not to proceed with our technical sale ... under the current circumstances."
In response to the shift, the stock was downgraded by a Bank of America analyst, which added more pressure to shares.
Now what
Rickman and his team believe the long-term outlook for the business is unchanged by this news. Rockley still has a large addressable market as wearable tech becomes part of the healthcare landscape. But sales trends will be hurt in the short term.
To that end, the company lowered its 2021 sales forecast to between $7 million and $8 million and its 2022 forecast to between $25 million and $30 million. That prediction had stood at $28 million in 2021 and $79 million for 2022.
While Rockley should still be able to monetize its data communication technology, investors might have to wait for several more quarters before seeing returns from this valuable piece of intellectual property.