Today, Joby Aviation (JOBY -12.09%) announced its decision to sell additional shares in a move to raise capital. This action diluted the value of existing shares, prompting a negative response from investors leading to a 14% decrease in Joby’s stock price as of 10:15 a.m. ET.
The Need for Additional Capital
Joby Aviation is among the companies focusing on developing small electric aircraft known as eVTOLs. While these aircraft hold promises of revolutionizing transportation, the technology is still in its early stages, requiring significant investments in research, development, regulatory approvals, and manufacturing.
In a recent development, Joby disclosed its plan to issue 40 million additional shares at $5.05 each, aiming to raise $202 million after expenses. This capital injection is earmarked for funding certification and manufacturing activities, preparing for commercial operations, and supporting general working capital needs.
Should Investors Consider Buying Joby Stock?
It’s common for a stock to experience a decline following a secondary offering, as it increases the share count and is usually priced at a discount. However, investors are advised to look beyond the short-term market reaction.
Given Joby’s pre-revenue status and significant financial obligations, the company requires this capital raise, in addition to the recent $500 million funding from Toyota Motor, to progress towards revenue-generating operations. If this funding paves the way for Joby to achieve commercial success, the dilution from the offering may become insignificant for long-term investors.
Although investing in a pre-revenue startup like Joby carries risks, those open to some uncertainty should view the secondary offering as an opportunity to potentially include Joby in a diversified investment portfolio.
It’s essential for investors to assess the risks involved and evaluate Joby’s long-term potential before making investment decisions.
Disclaimer: Lou Whiteman has positions in Joby Aviation. The Motley Fool holds no position in any stocks mentioned. The Motley Fool adheres to a disclosure policy.
