DigitalOcean Shares Plunge 9% on High Volume

DigitalOcean (NYSE:DOCN) shares dropped 9% today.  Volume was more than double normal.

It’s been a rough season for DO.  Shares today traded for as cheap as $59/share – well off the stock’s highs above $130/share only two months ago.

The reason for the plummeting valuation is not clear.  Some possibilities:

  1. DigitalOcean was overpriced.  It may still be overpriced.  The company is losing 28 cents a share on a 6.3B market cap.
  2. Investors generally loathe the “take on debt to buy back stock” approach to financial engineering.  It’s generally a cash out option that rewards owners at the expense of the long-term health of the company.  DigitalOcean announced this move recently.
  3. Motley Fool speculates it’s a reaction to announced Amazon and Microsoft moves in the cloud space.

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