Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of HubSpot (NYSE:HUBS) rose as much as 12% on Wednesday after it announced the pricing of its follow-on public share offering. HubSpot, which provides a cloud-based sales and marketing software platform, sold 4.11 million shares at $37 per share -- less than a 1% discount to Tuesday's closing price. The underwriters have a "green shoe" option to purchase an additional 617 million shares.
So what: I suspect today's stock price "pop" may be the result of short-sellers buying back the stock in response to a successful follow-on share sale. Indeed, for a "long" investor, this event provides little to no information regarding the likelihood the company will be successful in establishing a defensible franchise and generating a long-term stream of cash flows on behalf of its shareholders.
Now what: HubSpot shares have handily beaten the market since they began trading last October:
That momentum may attract investors' interest – success breeds success in the stock market, as it were. However, I would advise investors to keep in mind that HubSpot is a highly speculative issue. The company has yet to become profitable, with five consecutive years of losses through 2014, and analysts expect at least another year of losses.
Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.