Joby Aviation (JOBY, Financial) has felt the heat of market volatility, with its shares dropping by 15.48% to $5.11 last week after declaring its intention to launch a secondary public offering, which sought to offer 40 million shares at $5.05 each in a bid to realize $200 million. Shortly after receiving $500M from Toyota Motor, this decision is part of Joby's cost management plan to fund an expansive project, an electric air taxi service.
The net proceeds of the offering are planned to be used for certification of its electric vertical takeoff and landing (eVTOL) aircraft, expansion of manufacturing capacities, and preparations for the beginning of commercial operations. Morgan Stanley and Allen & Company LLC are handling the offering, which can go up to $202 million with underwriter options.
Therefore, the increase in the number of shares following the offering is exactly what the market dislikes in Joby's balance sheet. Some analysts worked up the stock prices, the more delighted they were with the trading volume per day as investors' attention was reported to have risen. Joby currently has a roughly $4bn valuation based on its PIPE deal and market opportunity in the nascent urban air mobility space. Still, it is a pre-revenue company with significant development costs, as evidenced by a negative gross margin of -2,977.42%.
This financial move is essential as Joby gets closer to launching its disruptive electric air taxi service, which plans to deliver a fast, silent, and traffic-avoiding commute in cities, a new form of mobility. While dilutive to current shareholders and suggestive of weak demand for Joby's equity, the offering enables the company to establish a deeper financial foundation as it approaches operating profit readiness in a notoriously resource-intensive and cyclical field.
