Home Financial Markets Why DavidsTea Inc (DEA) stock surged in the after-market session on Tuesday...

Why DavidsTea Inc (DEA) stock surged in the after-market session on Tuesday after an early loss?

DavidsTea Inc (DEA) stock started the Tuesday, May 4 with negativity and lost 7.74% in the normal trading to close at $3.22 per share. But, in the after-market session, DTEA turned around and gained 25.16% to close the day at $4.03 per share.

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DTEA shares have soared 323.68% over the last 12 months, and they have moved down by 9.04% in the past week. Over the past three months, the stock has lost 16.80%, while over the past six months, it has added 198.15%.

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Let’s see is there any reason behind its turnaround on Tuesday?

DAVIDsTEA seeking court authorization

On May 04, 2021, DAVIDsTEA Inc. said that it will seek authorization from the Québec Superior Court on Friday, May 7, 2021, to file its plan of arrangement under the Companies Creditors Arrangement Act (CCAA) and to call a creditors’ meeting to be held on June 11, 2021.

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According to the DAVIDsTEA plan, the company will distribute an aggregate amount of approximately CDN $18 million as a final settlement of all claims to its creditors and those of DAVIDsTEA (USA) Inc.

Earlier on March 19, 2021, Québec Superior Court extended the stay of all proceedings against the company to June 4, 2021

Financial results announcement

On April 30, 2021, DAVIDsTEA Inc. reported its fourth-quarter and full-year results for the period ended January 30, 2021.

Q4 2020 financial highlights

  • Q4 2020 sales were $40.2 million compared to $73.5 million in the fourth quarter of Fiscal 2019.
  • Gross profit was $15.6 million for Q4 2020, which is $23.4 million less in comparison with Q4 2019.
  • Selling, general and administrative expenses were $10.6 million in the three months ended January 30, 2021.
  • Operating loss in Q4 2020 was $27.2 million as compared to a loss of $6.0 million in the prior-year quarter.
  • Adjusted EBITDA was -$25.9 million in the Q4 2020 compared to -$1.1 million in the prior-year quarter.
  • DAVIDsTEA suffered a net loss of $27.2 million or net loss per common share of $1.00 in the Q4 2020 compared to a net loss of $5.7 million or net loss per common share of $0.21 in the prior-year quarter.
  • The Company had a total cash amount of $30.2 million on January 30, 2021. 

FY-2020 financial highlights

  • FY 2020 sales were $121.7 million compared to $196.5 million in Fiscal 2019.
  • FY 2020 gross profit was $49.7 million.
  • Selling, general and administrative expenses were $46.5 million in Fiscal 2020.
  • Operating loss in Fiscal 2020 was $53.1 million as compared to a loss of $26.7 million in Fiscal 2019.
  • EBITDA was -$45.6 million in the year ended January 30, 2021, compared to -$7.3 million in Fiscal 2019.
  • DAVIDsTEA suffered a net loss of $55.9 million in FY 2020 compared to a net loss of $31.2 million in FY 2019.
  • Fully diluted net loss per common share was $2.14 in Fiscal 2020 compared to $1.20 in Fiscal 2019.

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Conclusion

Well, there is no clear reason behind its mixed performance on Tuesday except its intention to seek court authorization which we do not think is the reason either for its loss or gains on Tuesday.

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