SOS Plummets 41% on $25 Million Direct Offering at $1.85 Per Share

The stock plunge ends days of big gains for the marketing analysis provider,
Anthony RussoJan 08,2021,17:49

After hitting its 23-week high Thursday, shares of SOS Ltd. (NYSE: SOS) have reversed course. Intraday Friday, SOS tumbled 41% on the news that the company applied to sell $25 million worth of its American depositary shares and warrants through a registered direct offering.

Under the agreement, “certain accredited investors" have agreed to buy 13.52 million shares, according to a statement posted by SOS today. The warrants, which will carry an exercise price of $1.85, are set to mature five years from the date of issuance.

Qingdao-based SOS, which provides marketing analysis, intends to use the proceeds for the development of blockchain-based security, insurance technology, general corporate purposes, and working capital.

The lone placement agent on the deal is Maxim Group LLC.

It's been a wild couple of weeks for SOS stock. On Dec. 22, when it announced a separate $4.03 million directed offering through the issuance of its shares and warrants, the stock plunged to a 29-week low of $1.25 per share.

However, this week, the stock posted some big gains. On Thursday, it hit a trading high of $4.10 per share before the downsized pricing of the offering today.

If you went ahead and bought at the dip in December when I recommended a buy on SOS, its shares are still up 39% since.

Formally known as China Rapid Finance Ltd., the company has moved away from peer-to-peer lending after Beijing's crackdown on the industry and its forcing firms to shift to other businesses. In late August, just 15 P2P firms remained in China, down significantly from 5,000 in 2017, according to the China Banking and Insurance Regulatory Commission.

But SOS has transformed and now provides marketing-related data, technology, and solutions to emergency healthcare services in China.

In December, SOS posted preliminary estimates for the 12 months ending December in what the company referred to as “record-breaking results.”

In the full year 2020, SOS expects to see revenues of around $49.5 million, skyrocketing 451% from 2019. It anticipates gross margins to be roughly 9% in the full year, up nearly double from 5% in 2019.

SOS also provided guidance for the full year 2021, expecting net revenues to grow by roughly 286%.

The company remains a solid bet going forward, as it appears to be growing fast in terms of revenue, even though its stock performance in 2020 did not reflect.

I would still look to buy if you haven’t already.

The registered direct offering is expected to close on Jan. 12.