Why Agora Stock broke today

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What happened

Actions of Agora (NASDAQ: API) arose today, up 25% at 11:10 a.m. EST, after the company announced it had raised capital through a private placement. Agora raises $ 250 million in new money. Existing shareholders will be diluted by approximately 4.5%.

So what

The Chinese technology company, which operates a real-time engagement platform, said an accredited investor has agreed to purchase newly issued Class A shares as part of the private placement. Agora did not specify who the investor is, but the company’s top three institutional shareholders are Dragoneer Investment Group, Black rock, and Capital World Investors.

Image source: Getty Images.

Agora recently announced the acquisition of Easemob, which provides instant messaging application programming interfaces (APIs), in an all-cash transaction for an undisclosed amount. Cash from the private placement could help fund this acquisition.

Now what

Agora has experienced strong growth but continues to spend money investing in its future growth. The company ended the third quarter with $ 635.4 million in cash, while free cash flow was negative $ 5.1 million, worse than the negative $ 1.3 million in the third quarter of 2019. Agora went public last summer, raising nearly $ 500 million from its IPO.

The company has yet to schedule the release of its fourth quarter results, but expects 2020 revenue to be between $ 125 million and $ 130 million. That translates to a revenue forecast of $ 24.7-29.7 million for the fourth quarter. Analysts model a turnover of $ 31 million.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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