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PreMarket Prep Stock Of The Day: Digital Ally

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PreMarket Prep Stock Of The Day: Digital Ally

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

On most occasions when a company does a stock offering, investors react negatively as it dilutes the holdings of their current stake. When a company announces an offering, then immediately rescind it, it could be even worse.

This exact scenario is what took place with Digital Ally (NASDAQ: DGLY) and is the PreMarket Prep Stock Of the Day.

The Company: Digital Ally produces digital video imaging and storage products for use in law enforcement, security, and commercial applications. Its products are an in-car digital video/audio recorder contained in a rear-view mirror for use in law enforcement and commercial fleets.

The company sells its products to law enforcement agencies and other security organizations and consumer and commercial fleet operators through direct sales domestically and third-party distributors internationally.

Long-Term Loser: The issue made its all-time high in June 2008 at $91.28. It cratered to end the year at $24.72 and wasn't done going down. It withered away over the next five years and didn't find a bottom until June 2014 at $3.30.

The road to zero was halted at $0.64 in March 2020. Amidst the summer riots, the issue spiked to $7.10 in June, but once again couldn't hold gains and ended that month at $3.14.

The rinse and repeat cycle continued taking the issue to $1.80 in September, however, the muted rally off that low came to an end on Wednesday at $3.98.

Getting When The Getting Is Good: As a result of the events at the U.S. Capitol on Wednesday, Digital Ally had its best day since Nov. 2 ($2.24 to $3.04), rallying from $2.74 to $3.63.

At 7:17 p.m. EST, in order to raise some capital, the company announced it intends to offer shares of its common stock for sale in an underwritten public offering. The Company expects to grant the underwriter a 45-day option to purchase up to an additional 15% of the shares of common stock offered in the public offering solely to cover over-allotments, if any.

The Street Says ‘Not So Fast’: Immediately after the press release in the after-hour session, the issue began to retreat from its closing price on heavy volume. By the end of after-hours trading, the issue erased all of Wednesday’s gains, ending the session at $2.68.

At 10 p.m., the company announced that due to market conditions, it elected not to proceed at this time with its plans to pursue an underwritten public offering of its common stock.

Thursday’s Price Action: Off the open of the premarket session, some investors anticipated that the cancellation of the stock offering would result in the issue returning to Wednesday’s lofty levels. Within 15 minutes of the open, it rallied on heavy volume to $3.49 and sharply reversed course.

That enthusiasm began to fade and the issue opened the regular session at its high for the day at $3.03. As of 12 p.m., it has come within a few pennies of Wednesday’s low, bottoming at $2.62, and is attempting to rebound.

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