Cardlytics Inc (CDLX)

Cardlytics Inc (CDLX) stock fell by 32.84% due to the announcement of a new round of financing through convertible senior notes. This move by the digital advertising specialist to raise at least $150 million in new capital led to widespread discontent among investors.

• New Financing Announcement: Before the market opened on Tuesday, Cardlytics revealed its plan to issue $150 million worth of convertible senior notes maturing on April 1, 2029. The company also granted the underwriters an option to purchase up to an additional $22.5 million worth of notes. The notes will pay interest semiannually until maturity, with the interest rate unspecified in the announcement.
• Intended Use of Proceeds: Cardlytics intends to use the proceeds from the new notes to repurchase a portion of its existing convertible senior notes issue maturing in 2025, which carry an interest rate of 1%. The remainder of the proceeds will be used for general corporate purposes, including funding working capital and capital expenditures.
• Investor Concerns: Investors reacted negatively to the announcement due to concerns about potential dilution and increased debt burden. If most of the new notes are converted into equity, it could significantly dilute existing shareholders' ownership, particularly given Cardlytics' current market capitalization of under $600 million. On the other hand, if the notes are not converted, they would add to the company's total debt, which stood at over $266 million as of the end of 2023.
• Market Reaction: The news of the financing led to one of the worst trading sessions for Cardlytics, with the stock losing almost a third of its value. The lack of specific details regarding the interest rate and conversion conditions likely contributed to investors' negative reaction, as uncertainty surrounding these terms could impact the attractiveness of the notes to potential investors.

Cardlytics, Inc. Stock (CDLX) dropped by 54.45% from $13.72 to $6.25 in the trading on Thursday November 9, 2023. The reason why CDLX stock down today is due to the downbeat sales results for the third quarter. Cardlytics reported Q3 Non-GAAP EPS of $0.01. beating by $0.14; while revenue of $79M, up +8.7% Y/Y, missing the consensus by $1.01M.