Planet Labs (PL) stock has been a deep disappointment over the past year, and I wanted to take a deeper, objective look at what is going on under the hood.
The stock is hovering close to its lows, around $3.30 after reporting disappointing earnings. At that price, and assuming total shares outstanding of about 270 million, the market cap is about $890 million. If you back out cash and short term investments of about $376 million, the enterprise value is about $514 million.
PL is targeting about $230 million in sales in this fiscal year (ending January 2024), but the company is not profitable. Indeed, PL is burning maybe $30-$40 million a quarter. So while there is no imminent risk of bankruptcy, it is more like a slow drip of diminishing value.
Dilution
In looking at the latest 10-Q, what really stuck to me is the massive dilution in play at PL. Shareholders are slowly being diluted away, little by little, and my sense is this is acting as a big overhang on the stock. First, notice the Statement’s of Shareholders’ Equity:
Just from January 2022 to April 2023, the share count has increased by about 8 million shares, or about 3%. But, that’s not the end of it. Looking forward, I was taken aback by the heavy dilution in the cards:
So this is weird table, because the company is apparently saying that including these amounts in diluted shares would not make sense because these shares are “non dilutive”. But this makes no sense. Just taking the common stock options, the weighted average exercise price is $4.32. My guess is most shareholders (or bagholders) have a cost basis above that price. In other words, the common stock options (representing over 10% of shares outstanding) become dilutive over $4.32. And then take the restricted stock, which is about 31 million shares, and are apparently tied to some EBITDA targets and continuing service. But, call me skeptical. For example, despite the poor stock performance last year, senior executives still “achieved” the performance targets to get their stock awards. Just look at the last proxy statement:
And then of course, the company issued more stock grants a few weeks ago:
Even recently when an insider bought stock, two days later he was granted more shares than he bought:
So assuming PL is able to get to maybe $5 a share in the coming year, all of a sudden over 60 million shares (over 20% of the company) will likely become dilutive.
This points to some deep corporate governance issues at PL.
Key Performance Indicators
On top of all of corporate governance issues, many of the KPIs are trending in the wrong direction. From the 10-Q:
I am long PL, but I am troubled after reading the latest 10-Q. There are some deep corporate governance issues with this company. It does not seem like they care about their shareholders.
References:
Planet Labs (PL) (June 18, 2023)
Planet (PL) V (April 1, 2023)
Planet Earnings (September 17, 2022)
Planet Labs (June 15, 2022)
Planet Labs II (April 16, 2022)
Planet Labs (December 21, 2021)