ChargePoint Stock Plunges on Capital Raise. It Makes Sense.

“We are pleased to secure … funding this quarter, which supports our stated goal of adjusted Ebitda profitability in the fourth fiscal quarter of next year,” said Rex Jackson, chief financial officer of ChargePoint, in a news release. “These raises and our recently announced $150 million revolving credit facility are consistent with our announced capital strategy to bolster our balance sheet. We have no further plans to access the [at the market].”

“Ebitda” is short for earnings before interest, taxes, depreciation, and amortization. “At the market” refers to a facility some companies utilize to sell shares on occasion, raising money, instead of selling a large block of stock in a traditional secondary offering.

ChargePoint isn’t profitable yet. Wall Street doesn’t project positive free cash flow until calendar 2025.

The total number of shares sold isn’t in the release. ChargePoint didn’t respond to a request for comment from Barron’s. Based on what’s in the company’s filing and recent pricing, perhaps 60 million new shares are in the market. That’s a 17% increase in the stock outstanding. So the stock move makes some sense. ChargePoint’s market capitalization, actually, is up a little at just more than $1.6 billion based on the new shares outstanding. It was just below $1.6 billion on Tuesday.

In addition to the capital raise, the company adjusted the terms of its convertible debt. The due date was pushed out, a positive for the company, but the conversion price was lowered to $12 a share from about $24. That is a negative for investors—more potential stock dilution—and is another factor influencing trading.

It appears the investors with convertible debt also purchased $175 million in stock. That is a reason terms might have changed. ChargePoint didn’t immediately respond to a request for comment confirming whether that was the case.

Taken together, the trading in ChargePoint stock on Wednesday looks sensible. The drop is close to what would be expected for a capital raise of that size. That hasn’t been the case with some capital raises recently.

Polestar Automotive
(PSNY) stock was down 3.4% on the possibility it would raise capital. It filed paperwork with the Securities and Exchange Commission. No shares had been sold yet.

Raising money should not be a surprise. Investors know it’s coming. Wall Street doesn’t project positive free cash flow for Polestar until 2028 at the earliest, according to FactSet.

The Polestar reaction might be a touch negative. The reaction to a
Rivian Automotive
(RIVN) was very negative. Shares dropped almost 23% on Oct. 5 after it announced a $1.5 billion convertible note sale. Everyone knows or should know, just like Polestar, that Rivian will need more capital to build its business. Wall Street doesn’t project positive cash flow for most of this decade. Still, investors and Wall Street reacted harshly with reasons given ranging from the timing was poor to the raise was a surprise.

The Rivian convertible notes might become about 64 million shares someday. That’s an increase to shares outstanding of about 7%.

UBS analyst Joe Spak used the dip to upgrade Rivian shares to Buy from Hold. He wasn’t surprised by the raise.

The Rivian and Polestar drops say more about investor sentiment than they do about either company. Sentiment is weak. Polestar ADRs, coming into Wednesday trading, have dropped 39% in the past three months. Rivian shares have falen 21% over that span. ChargePoint stock was down 71% over the past 12 months as of midday Wednesday.

Investors just don’t have the stomach for more speculative ideas these days.

Write to Al Root at [email protected]