QXO Inc, a company that had boasted an implied valuation of more than US$90 billion at one point last week, burned some investors badly late Monday (July 29) when its thinly traded shares spiralled sharply downwards.

Shares of the investment vehicle built by Brad Jacobs sank 81% to US$11.25 each in after-market trading. The Jared Kushner-linked firm unlocked millions of shares by registering a pair of private placements with the US Securities and Exchange Commission, swiftly creating selling pressure. 

The fallout offered a dose of reality as the stock traded closer to its implied value, based on the roughly US$5 billion Jacobs has raised. The late trading valued the company at roughly US$8.6 billion on a fully diluted basis, a premium to its cash value, though it shed some US$36 billion in paper value from Monday’s close.

QXO started with a US$1 billion investment by a group led by Jacobs into Nasdaq-listed SilverSun Technologies Inc. The investors announced the deal in December, revealing plans to spin off its existing business to shareholders, leaving the remaining company as a kind of blank-check vehicle, a standalone platform for acquisitions in an industry to be announced. Unlike a special-purpose acquisition company, the new firm would strike more than one deal. 

Jacobs disclosed the name and industry, building materials distribution, in the same month. QXO later decided not to spin off Silversun and will retain its business.

Jacobs’ company has built a war chest in recent months via private placements priced at roughly US$9.14 per share, bringing in billions of dollars, filings show, even as the publicly traded stock surged as high in June as US$290 apiece.

Small-time investors fueled a 112% jump in the stock earlier this month, days after QXO announced it had brought in a US$620 million private placement that included US$150 million from Kushner’s Affinity Partners. The son-in-law of former president Donald Trump was also tapped to join QXO’s board of directors.

Monday’s filing dramatically increased the pool of available shares to about 400 million from close to 665,000. The share count may grow even larger, as the private placement also gave buyers warrants. On a fully diluted basis, there could be nearly 890 million shares available for trading.

While the stock’s implied 96% drop from the June 10 peak appears jarring, the range of investors left with losses is likely small given the tiny number of shares that were available for trading at that point. In the three months before Monday’s filing, only about 35,000 QXO shares changed hands on a daily basis.

  - Bloomberg