Why Joby Aviation Stock Just Crashed
Key Points
Joby Aviation will sell $1.2 billion worth of new stock and convertible debt.
Make that at least $1.2 billion. $1.4 billion is more likely.
Investors face another round of stock dilution from Joby.
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Was it really just three weeks ago that I warned investors that Joby Aviation (NYSE: JOBY), the former SPAC IPO air taxi company with zero profits and zero free cash flow, was "likely [to] run out of cash and need to sell more stock (diluting its shareholders in the process)"?
And that when that happened, it "won't be good news for the stock price?"
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I guess it was.
And now Joby has done just what I said it would do -- issued a lot of stock -- and its stock is down 17.2% as of 12:25 p.m. Thursday!
Image source: Getty Images.
What Joby just did
Joby broke the bad news in stages. Last night, after trading had closed for the day, the developer of electric air taxis announced it will issue $1 billion in new common stock and "convertible senior notes due 2032" (that's debt, convertible into shares).
This morning, Joby clarified that it will actually float $600 million in convertible debt and sell 52.9 million shares of stock. Priced at $11.35 per share, that's $600 million -- so it's not $1 billion but $1.2 billion that Joby is actually raising.
Additionally, Morgan Stanley will sell 5.3 million shares "of Joby's common stock, borrowed from third parties ... to facilitate hedging transactions." These will generate no new cash for Joby.
What this means for Joby investors
Oh, and Joby's offering underwriters an option to buy $90 million more convertible debt and 7.9 million more shares. So add another $180 million to the total -- making this probably a $1.4 billion announcement!
What's it mean for Joby shareholders? 60.8 million more shares today, and probably 60.8 million more coming down the pike, so 121.6 million new shares total -- and just like that, Joby investors get diluted by another 13.3%.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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