Omniq (NASDAQ: OMQS) stock is down 44% this morning. The killer here for OMQS stock is the price at which they’re issuing new stock. A price which is going to annoy the underwriters as it’s going to make them have to work for their moment. It’ll also produce an overhang of stock that will likely be sold into any price rise in the immediate future. This is the sort of thing which can take some months to sort out.
As to what it is that Omniq actually does: “OMNIQ Corp. provides artificial intelligence based solutions in the United States. It provides computerized and machine vision image processing solution to deliver data collection, real time surveillance, and monitoring for supply chain management, homeland security, public safety, traffic and parking management, and access control applications. The company offer end-to-end solutions, which includes hardware, software, communications, and lifecycle management services; manufacture and distribute barcode labels, tags, and ribbons, as well as RFID labels and tags” and so on. Not a bad business to be in we’d think but it appears not to generate enough capital internally to continue to support operations. Thus the issuance of new stock.
Omniq stock price from Google Finance
The problem for the underwriters is that this current price is below that stock issue price: “OmniQ Corp. (Nasdaq: OMQS), (“OMNIQ Corp.” or the “Company”), a provider of Artificial Intelligence (AI)-based solutions, today announced the pricing of its underwritten public offering of an aggregate of 3,000,000 shares of its common stock (or pre-funded warrants (“Pre-Funded Warrants”) in lieu thereof). Each share of common stock (or Pre-Funded Warrant) is being sold at a public offering price of $1.00 per share (inclusive of the Pre-Funded Warrant exercise price).” This means the underwriters either take a loss when they move the stock on to retail buyers or they sit on it in the hope of a future price rise. But if they do that then that means there’s an overhang of stock to be sold into any future price rise. These things do happen and they often enough take a few months to sort out. Eventually all the stock is firmly placed and the overhang goes away.
But as we say, this can take months so it’s entirely possible that there will be no useful upward movement for those some months.