SoundHound plans to sell stock after big rally, and its shares are sliding

By Emily Bary

SoundHound's stock has soared this year after Nvidia listed it as a holding in a securities filing

SoundHound AI Inc. shares are under pressure in Wednesday's early trading after the conversational artificial-intelligence company announced an intention to sell stock.

The company said it had entered into an equity-distribution agreement with various banks as relates to an at-the-market equity program, through which SoundHound (SOUN) may sell up to $150 million in stock from time to time.

Shares of SoundHound were off about 10% in premarket action. Stock sales are generally viewed negatively by investors as they are dilutive to current shareholders.

The at-the-market equity program comes as SoundHound shares have enjoyed a roaring start to the year, rising nearly 130%. The stock captured Wall Street's attention beginning in February after Nvidia Corp. (NVDA) put out a 13-F filing detailing its public investments and showed that it had a stake in SoundHound.

SoundHound had a $1.5 billion market capitalization as of Tuesday's close. But serious financials have been elusive for the company. SoundHound generated just $17.1 million in revenue for its fiscal fourth quarter, which the company said was a record total, though it trailed the FactSet consensus of $17.7 million. At the same time, the company registered a loss of $18.0 million, though that narrowed from the year-earlier period.

Other trendy names have been heading to the bank lately to capitalize on their soaring stock prices. Super Micro Computer Inc. (SMCI) said in March that it planned to sell 2 million shares. The server maker had seen an explosive stock performance recently, with its shares up 950% in the year leading up to the company's announcement of its offering.

Coinbase Global Inc. (COIN), meanwhile, also announced in March a convertible-debt deal. Its stock had gained 74% in the month leading up to that announcement, as Coinbase has benefited from the rise in crypto asset prices and the recent launch of spot bitcoin exchange-traded funds.

-Emily Bary

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04-10-24 0848ET

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