Why Asure Software (ASUR) Stock Is Nosediving

What Happened:

Shares of online payroll and human resource software provider Asure (NASDAQ:ASUR) fell 10% in the afternoon session after the company announced it plans to offer and sell newly issued shares of its common stock in an underwritten public offering. Asure is expected to grant the underwriters a 30-day over-allotment option to purchase up to an additional 15% of shares of common stock, subject to market conditions. 

While this development will result in proceeds to the company, the market usually reacts negatively. Firstly, the offering price is usually below the current share price, and this offering is no different. ASUR shares are being sold at $12, below the previous day's $13.85 closing price. As such, issuing shares in this manner is sometimes a signal that the company itself thinks its stock is too expensive or overvalued. The announcement also results in dilution to existing shareholders, as their share of the company will be smaller due to the addition of the new shares into the total base.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Asure Software? Access our full analysis report here, it's free.

What is the market telling us:

Asure Software's shares are not very volatile than the market average and over the last year have had only 24 moves greater than 5%. Moves this big are very rare for Asure Software and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The previous big move was three months ago, when the stock gained 9.21% on the news that the company reported a "beat and raise" quarter, with Q1 results exceeding analysts' revenue, operating profits, gross margin, and earnings per share estimates. Revenue guidance for the next quarter also came in above Consensus, and the company lifted the full-year revenue outlook. Despite macro-related challenges, such as growing layoffs that could affect the adoption and usage of HR platforms, the company executed strongly, delivering an impressive quarter.

Asure Software is up 24.6% since the beginning of the year, but at $11.81 per share it is still trading 29.9% below its 52-week high of $16.83 from April 2023. Investors who bought $1,000 worth of Asure Software's shares five years ago would now be looking at an investment worth $891.11.

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