What happened
Share of Exela Technologies (XELA -14.53%) jumped as much as 18% on Wednesday after announcing that B. Riley Securities has purchased more than $35 million of the company's common stock. As of 3 p.m. ET today, the stock is up 10.2% on the day.
So what
B Riley Securities is an investment bank, so this sizable stake in the business process automation company (its current market cap is $233 million) likely inspired confidence among investors. Executives and directors of Exela are also purchasing more than $1 million worth of common stock along with the B. Riley investment.
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After the deal, the press release states, Exela Technologies will have to rely less on its at-the-money (ATM) common stock offerings. This is good news for existing shareholders, as the company has been greatly diluting shareholders in recent years, which lowers their ownership stake in the business.
Now what
Even after the rise today, Exela Technologies is still down 90% in the last three years. This is likely because of the consistent revenue declines, struggles to maintain profitability, and huge debt load on its balance sheet. Unless you understand this business well and think it can make a swift turnaround, it will likely be smart to stay away from the stock, even with this recent investment from B. Riley.
