Archer Aviation Inc. (NYSE: ACHR) tanked nearly 15% on Friday after raising some $850 million through a registered direct offering.
According to the electric vertical takeoff and landing (eVTOL) company, the said offering involved about 85 million of its shares, each of which was sold at a unit price of $10.
The capital raise helped strengthen ACHR’s balance sheet – its pro forma liquidity position now sits at about $2 billion.
Archer Aviation plans on using new funds to bolster its commercial capabilities and infrastructure. Despite today’s decline, Archer Aviation stock is up well over 50% versus its year-to-date low.
Why did Archer Aviation stock slip on Friday?
A pullback in ACHR shares this morning suggests investors are not particularly happy about the capital raise, which may be because of three big reasons.
One – a direct offering increases the total number of shares outstanding. So, the existing investors essentially had their stakes in Archer Aviation stock diluted on Friday.
Two – the eVTOL firm offered shares at a discount to attract institutional investors. But investors often read it as a sign of weak confidence in the company’s ability to raise money at full value.
And finally, the direct offering serves as a reminder that Archer Aviation needs a lot of cash to fund its electric air taxi development, certification, and scaling.
This could mean that ACHR will likely continue to burn cash at an accelerated pace, which may make it resort to more offerings, diluting the existing shareholders further moving forward.
Note that Archer Aviation stock does not currently pay a dividend to appear any more exciting to own at current levels.
Should you buy ACHR shares after today’s pullback?
Archer Aviation shares may be worth buying after today’s weakness since the macro story is turning quickly in its favour.
US President Donald Trump has recently passed an executive order aimed at accelerating the adoption of the eVTOL technology, which suggests ACHR’s products will likely attract significant demand from both the commercial as well as government sectors.
Additionally, the company based out of San Jose, CA has already been picked as the provider of air taxi services for the Summer Olympics (2028) in Los Angeles.
The globally followed event will be a remarkable opportunity for Archer Aviation to showcase its aircraft.
Note that the NYSE-listed firm already has a partnership in place with United Airlines as well to launch eVTOL services across major cities like New York and Chicago.
Those interested in loading up on ACHR stock at current levels may also take heart in the fact that Wall Street currently has a consensus “overweight” rating on the eVTOL company, with the mean target of $12.33 indicating potential upside of well over 20% from here.
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