Archer Aviation Inc., (NYSE:ACHR), plunged by nearly 15 percent on Friday following the raising of $850 millions through a registered offering.
The electric vertical takeoff-and-landing (eVTOL), company said that the offering included about 85 millions of its shares. Each share was sold for $10 per unit.
ACHR now has a pro forma liquid position of about $2 billion.
Archer Aviation will use the new funding to enhance its infrastructure and commercial capabilities. Archer Aviation’s stock has risen by more than 50% since its low for the year.
What caused Archer Aviation to slip in stock on Friday?
The pullback of ACHR’s shares in the morning indicates that investors may not be happy with this capital raising. This could be due to three main reasons.
A direct offering will increase the number of outstanding shares. Existing investors’ stakes in Archer Aviation were diluted by a large amount on Friday.
The eVTOL company offered discounted shares to institutional investors. Investors often interpret this as an indication of a lack of confidence in eVTOL’s capacity to raise capital at its full value.
The direct offering also serves to remind Archer Aviation that it needs money for its development of electric air taxis, their certification and scale-up.
It could be that ACHR continues to burn money at an increased rate, which will force it to make more offers, further diluting existing shareholders.
Archer Aviation does not pay dividends at the current price, so it isn’t a stock that would be more attractive to buy.
Do you still want to buy ACHR after the recent pullback?
Archer Aviation’s shares are worth a buy after today’s weakness, as the macro-story is rapidly turning in their favour.
The US President Donald Trump recently issued an executive order to accelerate the adoption of eVTOL technologies. This suggests that ACHR products are likely to be in high demand, both from the government and commercial sectors.
The company from San Jose in California has been selected to provide air taxis for the Summer Olympics of 2028, which will be held in Los Angeles.
Archer Aviation will have a unique opportunity to display its aircraft at this globally watched event.
The NYSE listed firm has already partnered with United Airlines to launch eVTOL service in major cities such as New York and Chicago.
The Wall Street consensus rating of “overweight”, with a mean price target of $12.33, indicates a potential gain of over 20%.
The post Archer Aviation Stock Tanks After Raising Capital: 3 Reasons to Buy the Dip in ACHR (Archer Aviation stock tanks after raising capital) may be updated as new information unfolds.
