ChargePoint Stock Powers Down on Stock Offering

Shares of ChargePoint (NYSE: CHPT) tanked by as much as 9% on Tuesday after the company announced a secondary stock offering. The news comes after ChargePoint stock has been climbing in recent weeks as investor sentiment around electric vehicle (EV) companies has improved. As of 11 a.m. EDT, the stock was still down by 8%.

Here’s what ChargePoint investors need to know about the offering.

Early investors are cashing out

The most important thing to know about the offering is that ChargePoint is not issuing and selling any new shares, which would be dilutive to existing shareholders. Rather, a group of early investors are looking to sell 12 million shares in an orderly fashion. The underwriters will also have a greenshoe option for 1.8 million additional shares. 

The company will not receive any proceeds from the offering. Keep in mind that ChargePoint just redeemed its public warrants, raising capital from warrant holders so the company doesn’t necessarily need to raise more cash from investors quite so soon.

The investors unloading stock are prominent venture capitalists and other institutional funds. Linse Capital, which first invested in ChargePoint back in 2016 when the company was still private, is selling 7.9 million shares.

Quantum Energy Partners, which invested in 2018, will unload 3.1 million shares. Braemar Energy Ventures is one of ChargePoint’s oldest investors, first buying in around 2012, and is now offering 2.2 million shares. 

Beyond institutional investors, a handful of executives are also taking the opportunity to cash out some equity, including CEO Pasquale Romano, Chief Revenue Officer Michael Hughes, managing director Chris Burghardt, engineering chief Eric Sidle, and director Rick Wagoner.

Wagoner is one of ChargePoint’s most prominent directors, having previously served as CEO of auto giant GM (NYSE: GM). Combined, all the insiders are selling approximately 569,000 shares.

Trying to avoid a sell-off

Companies that have recently gone public often have shares that are subject to lock-up agreements. Once those lock-up agreements expire, the stocks can experience significant volatility as early investors such as venture capitalists or employees who received equity-based compensation are free to sell their shares. 

Stocks commonly decline once such agreements expire, which frees up more outstanding shares to become tradeable in the open market. In an effort to mitigate volatility, companies will sometimes launch secondary offerings to allow insiders to sell in a more orderly fashion.

In ChargePoint’s case, it went public by merging with a special purpose acquisition company (SPAC), closing its “de-SPAC” transaction back in February. ChargePoint’s lock-up agreements are scheduled to expire on August 26th, but in this case the company has broad discretion over waiving the restrictions earlier.

“The Board, in its sole discretion, may release all or some portion of the shares of Common Stock subject to such lock-up agreements at any time, for any reason and with or without notice,” ChargePoint notes in the prospectus. “In contemplation of this offering, the selling securityholders who were subject to the transfer restrictions under these lock-up agreements were released by waiver from such restrictions solely with respect to the portion of their securities offered for sale in this offering.”

As of last Friday, roughly 70% of outstanding shares were still bound by lock-up agreements. In conducting a secondary offering, ChargePoint tried to avoid a sell-off related to lock-up expirations but appears to have failed to accomplish that goal.

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