XpresSpa Group (XSPA) Stock Tumbles On Offering News

XpresSpa XSPA Stock News

XpresSpa Group Inc (NASDAQ: XSPA) is tumbling in the market at the moment, and for good reason. The company announced that it is raising funds through a dilutive offering. Here’s what’s going on:

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XSPA Stock Is Tumblinb On Public Offering

In the press release, XpresSpa said that it entered into a securities purchase agreement with several healthcare-focused and other institutional investors. Under the securities purchase agreement, the investors will be buying 11,216,932 shares of common stock and short-term warrants to purchase up to an aggregate of 11,216,932shares.

The transaction will take place as a registered direct offering priced at the market under NASDAQ rules. In the release, XSPA said that the combined purchase price for the share of common stock and a warrant to purchase one share of common stock will be $3.15.

Moreover, the exercise price on the warrants is $3.02 per share. these warrants will be exercisable immediately and expire 24 months from the date of issuance.

In the release, the company said that the transaction will result in gross proceeds of $35.3 million. Net proceeds from the transaction are expected to be used for working capital and general corporate purposes. Finally, XSPA said that the transaction is expected to close on or about August 28, 2020.

Of course, diluting the stock by more than 11 million shares doesn’t bode well with investors. As a result of the move, we’re seeing tremendous declines,  but is this an opportunity?

These Declines Are An Opportunity

While an investment in XpresSpa is a risky play, considering everything that we’ve seen from the company throughout 2020, it may also be a very profitable one. The fact of the matter is that the need to raise funds was going to be there as soon as the coronavirus pandemic hit. However, these funds have the potential to lead to tremendous gains.

Keep in mind, XSPA is working dilligently to bring COVID-19 testing centers to airports across the United States. In fact, the company already has two pilot programs running. Of course, there is going to be some cost involved in developing these testing centers. So, the funds were necessary.

Nonetheless, the long-term opportunity brought about by the company’s testing center plans should not be ignored. While vaccines and treatments are on the way, the fact of the matter is tht we have vaccines and treatments for the flu, but we still deal with it every year.

Many experts argue that COVID-19 will follow along the lines of the same trend, with annual recurrences. Considering the fear that the illness has struck in the hearts of consumers, there will likely be an overwhelming demand for testing for years to come. XSPA is working to tap into that, and to me, that’s a valuable proposition.

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