BigBear.ai Holdings (BBAI) stock declined 14.9% yesterday after the company disclosed that it will delay its annual 10-K filing for the year ended 2024. In addition, the company said that it would restate its financial results for the Fiscal Years 2022 and 2023, as well as individual quarterly results for 2023 and 2024. BBAI even stated that its 2021 audited financials should no longer be relied upon.
This move stems from an accounting error related to convertible notes maturing in 2026. Specifically, the embedded conversion option was not initially accounted for as a derivative, requiring correction through refiling.
BBAI Expects Minimal Financial Impact
Even though there is a delay, the company expects higher revenues and gross margins for 2024. However, it predicts a bigger loss before income taxes compared to last year. BBAI also reassured that the accounting changes will not affect its past revenue, profit margins, adjusted EBITDA, or operating cash flow.
Currently, BigBear.ai plans to submit its report within 15 days of the original deadline.
Here’s How Delayed Filing Impacts BBAI
This setback comes at a time when BigBear.ai is making efforts to secure new government contracts and improve its financial standing. While the company has made progress in expanding its client base and revenue streams, the accounting issues can harm BBAI’s reputation.
Also, investors’ negative reaction points to the uncertainty about the company’s financial health and the potential impact on its future performance. The announcement also raised concerns about BigBear.ai’s internal controls and governance.
Moreover, the SEC may closely monitor companies with delayed filings, potentially leading to penalties or additional compliance requirements.
Is BBAI a Good Stock to Buy Now?
Turning to Wall Street, BBAI stock has a Moderate Buy consensus rating based on two Buys and two Holds assigned in the last three months. At $5.33, the average BigBear.ai price target implies a 79.46% upside potential. Shares of the company have gained 87.97% over the past six months.
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