What Happened:
Shares of AI lending platform Upstart (NASDAQ:UPST) fell 9.8% in the morning session after the company announced plans to offer $300 million in Convertible Senior Notes due in 2029 to qualified institutional buyers. The stock is likely down due to concerns about the dilutive effect of the notes, which can be converted to the company’s ordinary stock, raising the total share count.
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What is the market telling us:
Upstart’s shares are very volatile and over the last year have had 66 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was about a month ago, when the stock gained 48.9% on the news that the company reported second-quarter earnings results. Revenue, adjusted operating income, and EPS all exceeded analysts’ estimates.
Upstart provided revenue guidance and a rosy outlook for the next quarter, which blew past analysts’ expectations. Management attributed the improved sentiment to advancements in its AI models. Zooming out, this was an impressive quarter that should delight shareholders.
Upstart is down 6.7% since the beginning of the year, and at $36.27 per share it is trading 23.3% below its 52-week high of $47.31 from December 2023. Investors who bought $1,000 worth of Upstart’s shares at the IPO in December 2020 would now be looking at an investment worth $1,229.
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