Key Points
Fluor is taking steps that could permit it to sell a large chunk of its stake in NuScale Power.
Investors in NuScale rival Oklo may be taking a cue from Fluor’s action.
Both nuclear start-ups have seen their share prices soar this year, and large sums of “paper profit” are now at risk.
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Shares of Oklo (NYSE: OKLO), one of a handful of start-up nuclear companies aiming to commercialize small modular reactors, slid 4% through 12:25 p.m. ET Friday — and not because of anything Oklo did wrong.
Instead, Oklo is falling because of something Fluor (NYSE: FLR) did right.
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Fluor gets ready to cash in
Nuclear engineering powerhouse Fluor announced this morning that, in order to cut down on “volatility” in its earnings results, which have skyrocketed on required “pre-tax mark-to-market gains” in the value of the stock it owns in NuScale Power (NYSE: SMR), Fluor will convert 15 million of its Class B NuScale shares into Class A shares… that it can then sell.
The less NuScale Fluor owns, the less volatile its earnings numbers will look. And the more NuScale stock Fluor then sells, the more NuScale profits it can lock in and convert to cash.
Is it time to sell Oklo stock?
So why is this bad news for Oklo, which isn’t involved in Fluor’s transactions? Simply for this reason: Oklo investors are watching Fluor take the first steps toward selling off a lot of its stake in NuScale, and they’re probably wondering if Fluor has decided to “take profits” on its NuScale investment — and whether they should do similarly.
That’s a fair question to ask.
NuScale stock, after all, has gained an astounding 485% over the past year. But the 835% gain of Oklo stock over the past year makes NuScale’s gains look almost modest. Neither company earns any profit to justify its high stock price, moreover, nor is either NuScale nor Oklo expected to become profitable for years.
Given all this, selling some NuScale stock now seems a prudent decision for Fluor… and selling some Oklo stock right now might be a good idea for you, too.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.
