EVgo Stock Plummets 27%: Insider Selling Sparks Concern
The electric vehicle (EV) charging station operator, EVgo (NASDAQ: EVGO), saw its stock price tumble 27% by 10:05 a.m. ET on Tuesday. This drastic drop was triggered by the announcement of a secondary offering, where EVgo Holdings, LLC, an affiliate of LS Power Equity Partners IV, L.P., will sell at least 23 million new shares of common stock, potentially reaching 26.5 million shares. The shares will be priced at $5 each, a 21% discount to the previous day’s closing price.
The Insider’s Move Raises Questions
What’s crucial to understand is that EVgo Holdings and EVgo are distinct entities. EVgo Holdings, referred to as “the insider” here, is an affiliate of LS Power Equity Partners IV, L.P., a significant shareholder of EVgo. This insider sale has sparked concerns among investors, as it appears that someone who owns approximately 25% of EVgo’s outstanding shares is offloading them at a discounted price.
The Consequences for EVgo Investors
The insider will reap all the benefits from this sale, estimated to be between $115 million and $132 million before fees. Meanwhile, EVgo will not receive any proceeds from the sale. This revelation has left investors reeling, as they’re now holding shares in a company that has never turned a profit and is expected to continue losing money in the next decade.
A Warning Sign for Investors
The insider’s decision to sell a substantial chunk of EVgo shares at a discounted price may be seen as a strong indication that it’s time to reassess one’s investment in the company. Before investing in EVgo, it’s essential to consider alternative options that may offer better returns.
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