Saturday, 25 March 2023

Why Upwork Stock Jumped 15% This Week

by Earn Media

What happened

Shares of Upwork (NASDAQ: UPWK), a platform for connecting freelancers to clients, soared 15.4% this week, according to data provided by S&P Global Market Intelligence, after the company said that it would buy back some of its convertible debt.

So what

Upwork said in a regulatory filing this week that it entered into a repurchase agreement to buy back some of the 0.25% convertible debt that will come due in 2026. The company said that it will spend about $157 million in cash for the purchase, which is expected to close around March 27.

The company further said that the principal amount of notes left outstanding will be $378.2 million.

Investors are typically happy to see when a company buys back some of its debt, and that appears to be what’s helping to drive this gig economy stock higher this week.

Now what

In an increasingly unpredictable macroeconomic environment, Upwork investors have been especially bullish on the company’s move to buy back debt. Many technology companies have been under financial pressure from higher interest rates, which make it more expensive for high-growth companies to borrow money.

That’s caused many tech investors to keep a closer eye on companies’ profits, losses, and debt. So Upwork’s decision to improve its debt situation this week was welcomed by investors.

But while the share price gains are good, Upwork investors should also remember that there’s still a lot of volatility in the market right now, and the gains could quickly be lost if the broader macroeconomic environment sours. The Federal Reserve raised interest rates again this week — by 25 basis points — and while it was a smaller increase than in the recent past, it comes at a time when there’s still uncertainty from the banking industry and investors are still worried about a potential recession.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool recommends Upwork. The Motley Fool has a disclosure policy.