What happened

Shares of Axon Enterprise (NASDAQ:AAXN) have fallen today, down by 7% as of 2:15 p.m. EDT, after the company announced a secondary offering on Monday. The Taser and body camera specialist is looking to sell 3 million shares to beef up its balance sheet.

So what

Based on yesterday's closing price of approximately $100, issuing that quantity of new shares could raise around $300 million in fresh capital. The deal has not yet priced, so the amount that Axon is ultimately able to raise remains to be seen. Underwriters will have an option to purchase up to 450,000 shares, depending on investor demand for the offering.

Police officer with a holstered Taser

Image source: Axon.

Axon says it intends to use the proceeds for working capital and general corporate purposes.

Now what

Generally speaking, it's common for stocks to fall because of secondary offerings due to the dilution to existing shareholders. Total shares outstanding after the offering closes would be a little over 63 million (assuming that underwriters do not exercise their options), which represents dilution of approximately 5%. Axon finished last quarter with $395 million in cash on the balance sheet.

Much has changed since Axon's first-quarter earnings release in early May, most significantly the social unrest and protests over police brutality and use of force. The COVID-19 pandemic already threatened to impact municipal budgets' allocation to law enforcement, and recent events have increased risks to police funding. In the offering's prospectus, Axon warns that "the recent changes in public sentiment around police funding may also impact our revenue."