Why Asure (ASUR) Shares Are Getting Obliterated Today
What Happened:
Shares of online payroll and human resource software provider Asure (NASDAQ:ASUR) fell 9.5% in the morning session after the company reported third quarter results and provided revenue guidance for the next quarter that missed Wall Street's expectations. Asure noted that the Q4'23 revenue outlook excludes potential contributions from ERTC (Employee Retention Tax Credit), citing a pause in processing ERTC claims by the IRS since September. With the FY'24 revenue guidance also excluding ERTC contributions, there's uncertainty regarding its impact on sales growth. On the other hand, revenue and EPS came in ahead of Consensus estimates. Additionally, gross margin improved. Overall, it seems expectations were high ahead of the results, and given the underwhelming growth outlook and potential uncertainty relating to revenue from ERTC filing, it is hard to make a case for investors to stay optimistic.
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What is the market telling us:
Asure's shares are not very volatile than the market average and over the last year have had only 28 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 10% on the news that 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.
Asure is down 29.7% since the beginning of the year, and at $6.67 per share it is trading 60.4% below its 52-week high of $16.83 from April 2023. Investors who bought $1,000 worth of Asure's shares 5 years ago would now be looking at an investment worth $1,099.
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