Today's downturn in Archer Aviation's share value could be attributed to various factors.
Archer Aviation (ACHR dropping by 5.92%) is experiencing substantial sell-offs during Wednesday's trading sessions. As of 11:15 a.m. ET, the company's share price plummeted by 8.6%.
Prior to the market opening, Archer Aviation, the flying electric vehicle company, submitted a filing to the Securities and Exchange Commission (SEC) showing their intentions to produce and sell new shares. The organization has entered into an agreement to sell up to $70 million worth of new Class A common stocks.
Archer Offloads Shares for Capital Injections
Archer Aviation's recent filing to the SEC stirs up anxiety among shareholders regarding potential dilution. When a company issues more shares, the percentage owned by previous shareholders reduces. In simpler terms, the same-sized pie is being divided into an increased number of slices, which, in turn, shrink in size.
On the upside, this stock sale provides the company with a fresh influx of capital to fuel its growth.
Archer Aviation reported a substantial net loss of $115.3 million during the third quarter, with zero revenue to show for it. Nevertheless, they closed the quarter with a healthy cash reserve of approximately $501.7 million. Given the company's rapid burn rate in funding safeguard and expansion efforts, it's no surprise that Archer is selling new shares to secure additional funds.
Archer's Future Agendas
Even before the latest stock offering announcement, Archer Aviation had already increased its outstanding share count by roughly 48% since its merger with a special purpose acquisition company (SPAC) in 2021. As the company is still in a pre-revenue phase and incurring considerable losses, it is likely to continue selling fresh shares to raise money. However, if Archer manages to shift gears to consistent revenue generation, their future looks promising.
Archer Aviation is currently making significant strides toward commercialization and has recently sealed some prominent contracts in the United Arab Emirates and Japan. In particular, their contract to supply their Midnight flying vehicles to Japan Airlines and Sumitomo's joint venture company might generate up to $500 million in revenue.
Being a pioneering player in the fledgling flying taxi market, Archer Aviation holds immense potential. If the company secures a long-term position in the market, its stock price is poised to skyrocket. However, investors should remember that this success is far from guaranteed, and the company might face several challenging roadblocks even in the event of long-term success.
Given Archer Aviation's recent SEC filing to sell up to $70 million worth of new shares, some investors might be concerned about the potential impact on their existing share value due to potential dilution. However, the funds raised could be beneficial for the company's growth, as demonstrated by Archer's substantial net loss and rapid burn rate during its pre-revenue phase. Investors might want to consider the company's potential future revenues from contracts in the United Arab Emirates and Japan, which could significantly boost Archer's financial situation and, in turn, its stock price.