Joby Aviation Stock Drops Overnight on $513.9M Share Offering

Joby Aviation (NYSE: JOBY) witnessed an 8.2% decline in its stock price overnight, moving sharply lower following the announcement of a $513.9 million underwritten public offering of common stock. This offering, initially intended to raise $500 million, was increased and priced at $16.85 per share, the lower end of the $16.85-$17.35 range, and below the closing price of $18.91. 

The offering increases the number of outstanding shares, contributing to the downward pressure on the stock via dilution. Morgan Stanley acted as the sole book-running manager for the transaction. Furthermore, the agreement includes a 30-day option for the underwriters to purchase up to an additional $75 million worth of common stock at the offering price, net of underwriting discounts and commissions.

Joby intends to utilize the net proceeds from this offering, alongside its existing cash reserves, to bolster its progress toward aircraft certification, expand its manufacturing capabilities, prepare for the commencement of commercial operations, and for general corporate purposes.

This capital raise aligns with Joby's projected cash usage for 2025, estimated to fall between $500 million and $540 million, highlighting the necessity of securing additional funding to support its ambitious operational and developmental milestones.

Despite what has been a very bullish run so far this year, capital raises typically cast a near term shadow on  sentiment. The need to raise capital through equity offerings, while necessary to fund operations and expansion, can often lead to short-term pain for existing shareholders due to dilution. The stock has performed impressively year-to-date, with a 133.75% increase, suggesting that markets are optimistic about the long-term potential of Joby's electric air taxi vision.

The market's reaction underscores the delicate balance between raising capital and maintaining shareholder value. There remains plenty of excitement in the potential of industry in the coming years, yet it is important to note that companies in this growth, and pre revenue phase do have to raise funds in order to meet operation goals. Existing holders may be comforted somewhat by JOBY having added 40.8% in the month leading to the offering.