Shares of drone maker AgEagle Aerial Systems (NYSEMKT:UAVS) fell roughly 10% in the first 90 minutes of trading on April 20. That drop comes a day after the stock rose 7.5% in a roller-coaster session. From a big picture perspective, the ups and downs here aren’t that shocking.
Before the market opened on April 19, AgEagle announced that it had agreed to acquire Measure, which it describes as an aerial intelligence solutions company. Measure’s main product is called Ground Control, which is a cloud-based software product that allows for the control of drones. Measure’s client list includes companies like Marathon Pipeline, CNN, CoStar Group, LAPD, and Nationwide Insurance. The purchase price was $45 million in stock and cash.
On the surface, this sounds like a decent addition to AgEagle’s portfolio, which is probably why investors bid the stock up on the initial news. However, this is its second acquisition this year, and buying businesses requires spending money. In fact, more often than not, the acquiring company in a transaction will see its shares fall. So it’s not exactly shocking to see investors go from excited about the prospects for this specific acquisition to wondering about the costs the company is incurring as it goes down the acquisition path. Thus, the stock pulled back.
It’s been a pretty interesting year for AgEagle stock. Not long ago it was little more than a penny stock, but then there were rumors that it was working with a giant retailer in support of that customer’s drone delivery efforts. Although there is a customer and revenues have increased notably because of that customer, the company still hasn’t announced what company it is working with. So, in the vacuum, the rumor mill has driven the stock higher and lower. At one point in 2021 it was up by as much as 150%, but it is now down 18% for the year. Notably, the company’s first-quarter loss increased year over year, which hasn’t helped investor sentiment. Indeed, at this point, AgEagle’s shares are probably being driven more by emotion than anything else, suggesting that most long-term investors should be watching this roller-coaster ride and not on it.
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