This week saw a significant drop in EVgo's share price.
This week saw a significant drop in EVgo's share price.
EV stocks of electric vehicle (EV) charging company EVgo (EVGO) experienced a dip, dropping up to 30.4% this week, as reported by S&P Global Market Intelligence. This downturn followed an insider selling off 23 million shares at $5 each.
The major dispense
On Monday, LS Power, EVgo's primary shareholder, announced an underwritten sale of 23 million shares. This sale was executed at $5 per share, with $4.8125 going to the seller and the remaining $0.1875 to the investment banks facilitating the deal.
In such transactions, the investment banks pledge to purchase shares at a cheaper price than the current market value, which was $6.09 per share as of last Friday's close. They expect to make a profit by subsequently selling these shares. Unfortunately, the market had other plans, and shares traded significantly below the $5 sale price throughout the week.
Power grappling
The charging sector was previously perceived as an excellent growth opportunity within the energy sector. However, none of the major players have managed to turn this potential into profitability. A closer look at EVgo's financials reveals a growing trend in revenue, coupled with consistent losses over the past few years.
As a new U.S. administration takes office in January, there's a possibility that funding for charging infrastructure and electric vehicles might be reduced. Consequently, the growth rate could slow down, negatively affecting profitability. This situation was not met favorably by one prominent investor, who chose to offload their shares prior to potential further losses. In light of this, investors still holding on to charging stocks might want to consider divesting to avoid a situation where these companies can no longer secure funding due to plummeting stock prices.
The insider sale of 23 million shares by an investor at $5 each, despite the current market value of $6.09, could be seen as a signal of financial concerns in the electric vehicle charging sector. Following this move, individuals who have invested in EV charging stocks might want to reconsider their investments, considering the potential impact of reduced funding on profitability.