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SolarWinds Corp. (SWI) Stock Plummets Following Announcement of Completion of Spin-Off Business

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SolarWinds Corp. (SWI) stock prices were down by a massive 47.37% as of the market closing on July 19th, 2021, bringing the price per share down to USD$8.92 at the end of the trading day. Subsequent premarket fluctuations have seen the stock fall by another 37.00%, bringing it down to USD$10.66.

Spin-Off Business

July 20th, 2021 saw the company announce the completion of its previously announced spin-off of the SWI managed service provider (MSP) business into N-able, Inc., a standalone public company that is traded separately. With the completion of the transaction having taken place on July 19th, 2021, the newly listed spin-off company will facilitate the provision of cloud-based software solutions for managed service providers.

Birth of N-able

This, in turn, will allow the MSPs to support digital transformation and growth within small and medium-sized enterprises. While N-able will be listed on the New York Stock Exchange under the NABL ticker, SWI will retain control of its Core IT Management business, which will primarily focus on Providing IT infrastructure management software to corporate IT organizations.

Financial Forecasts

Following the company’s initial review of its financial performance for the second quarter of 2021, SWI anticipates reporting total revenue ranging from USD$260.8 million to USD$262 million. This forecast accounts of roughly 6% year-over-year growth, including the company’s Core IT Management revenue-generating USD$176 million to USD$177 million, representing a 2% year-over-year increase. GAAP net loss for the second quarter of 2021 is expected to be in the range of USD$10.4 million and USD$11.3 million.

Private Placement Offering

July 12th, 2021 saw the company announce having entered into a definitive agreement with various institutional accredited investors in regard to a private placement financing transaction. The transaction is expected to generate roughly USD$225 million before the deduction of expenses related to the offering. As per the agreement, the company will issue a total of 20,623,282 shares of its common stock, with each share being priced at USD$10.91. Having culminated on July 19th, 2021, N-able will diver the net proceeds generated from the offering to SolarWinds before the closing of the distribution. The capital generated is expected to be used in distribution to its stockholders, as well as to pay down existing third-party indebtedness.

Future Outlook for SWI

Armed with the influx of capital from the offering having resulted in a healthier balance sheet, SWI is poised to capitalize on the opportunities presented to it and its spin-off business. Current and potential investors are hopeful that management will continue to leverage the resources at their disposal to facilitate a continued trajectory of success for the company.

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