Serve Robotics Inc. (SERV) experienced a significant decline in its stock price, closing at $18.61, down 18.70% from the previous close of $22.89. The stock opened at $19.49, reached a high of $20.44, and hit a low of $17.75, with trading volume surging to 21,688,905 shares, 264.76% of its average volume. The sharp drop was primarily driven by the announcement of an $80 million registered direct offering, which involves the sale of 4,210,525 shares of common stock. This offering is expected to close on January 7, 2025, and is anticipated to result in approximately 8.5% dilution to existing shareholders, weighing heavily on investor sentiment.
The news of the offering was met with mixed reactions on social media, with some users on Reddit expressing concerns over the dilution effect, while others remained optimistic about the company's long-term growth potential. The involvement of institutional investors in the offering suggests confidence in Serve's business model, despite the immediate negative impact on the stock price. The funds raised are intended for general corporate purposes, including working capital, and to support the expansion of Serve's delivery robot fleet, which is expected to grow from 100 to 2,000 robots by the end of 2025.
Additionally, the broader market context includes Serve's participation in the International Consumer Electronics Show (CES) 2025, which highlights the company's role in the growing autonomous delivery sector. However, the immediate market reaction focused on the dilution concerns, overshadowing the potential long-term benefits of the capital raise.