RAYA Shares Plunge 11.72% as Direct Offering Sparks Dilution Fears

Erayak Power Solution Group Inc. (RAYA) plunged 11.72% on Tuesday, marking its third consecutive day of declines with a cumulative drop of 46.94% in three trading sessions. The stock hit a record low during intraday trading, with a steeper 16.67% decline observed before closing the session. This sharp sell-off follows a registered direct offering of $3 million announced on July 25 and finalized on July 28, 2025, which has intensified investor concerns about equity dilution and financial stability.

The strategy of buying RAYA shares after they reached a recent high and holding for 1 week showed poor performance over the past 5 years. The annualized return was -22.4%, significantly underperforming the market. This indicates that relying on recent highs as a buying trigger and holding for a short duration is not a viable strategy for RAYA.

July 2025 Raise: On July 25, 2025, Erayak Power Solution Group Inc. announced a securities purchase agreement with institutional investors, resulting in a registered direct offering of 30,612,246 Class A ordinary shares and pre-funded warrants, raising approximately $3 million.

Capital Allocation: The funds were allocated to upgrading the company’s automated warehousing system, advancing product development, expanding sales and marketing efforts, and supporting working capital. This capital infusion aims to strengthen Erayak’s competitive edge and operational efficiency in the power supply sector.

Market Reaction: Erayak Power's stock price surged to its highest level since March 2023 today, with an intraday gain of 20.77% on July 7, 2025, and 15.20% on July 1, 2025, following the announcement of strong earnings and strategic partnership.

Investment Strategy: The company's financial health has instilled confidence in investors, contributing to the recent surge in its stock price. Looking ahead, Erayak Power is poised for continued growth as it capitalizes on the increasing demand for renewable energy solutions.

The offering, structured as a "penny stock" initiative without underwriting, involves issuing new shares directly to investors at $0.110 per share. Such strategies, while common for capital raising, often signal liquidity pressures or speculative growth ambitions. The lack of institutional backing and the absence of broader positive operational updates—such as revenue growth, partnerships, or product developments—have exacerbated market skepticism. Investors are interpreting the move as a red flag, prompting aggressive risk-off behavior amid heightened sensitivity to volatility in low-liquidity markets.

RAYA’s market cap of $5.56 million amplifies the psychological impact of the offering, as even modest capital raises can trigger disproportionate reactions. The timing of the announcement, finalized just days before the stock’s record low, left little room for market participants to digest the information. This rapid execution, combined with the absence of phased capital deployment plans, has fueled perceptions of urgency and potential cash flow constraints. In contrast, similar offerings by companies like AST SpaceMobile and Abivax were accompanied by clear capital allocation details, which helped mitigate market concerns.

The absence of transparency regarding RAYA’s core power solutions business—its product pipeline, revenue streams, or competitive positioning—further compounds uncertainty. While the company operates in a capital-intensive sector, no strategic updates or operational milestones were disclosed to justify the equity raise. This lack of context has left investors with limited confidence in the offering’s long-term value, reinforcing the perception of the move as a defensive rather than growth-oriented strategy.