Joby Aviation (JOBY 1.23%) took investors on a wild ride in September. The stock traded down 20.8% for the month, according to data provided by S&P Global Market Intelligence, but at its low for the month was down nearly double that amount.
Joby is an air taxi start-up that went public earlier his year via a special purpose acquisition company (SPAC), and in early September Joby released a large amount of stock for sale by insiders. The company in a Securities and Exchange Commission filing registered 540 million shares for potential resale, saying that 427.7 million of those shares are currently held by "selling shareholders" and an additional 83.5 million are held by entities that bought into the SPAC deal.
Insider selling is not unheard of, and can be innocuous. The stock had enjoyed a decent run higher heading into September, and insiders can use stock sales to better diversify their holdings. But the selling would, if nothing else, add to the total number of shares available to trade, potentially altering supply and demand dynamics and putting pressure on share price. And it can be seen as a sign that institutional holders are not as bullish on a company's prospects as the market is.
Joby does still have its fans on Wall Street. The stock recovered some of what it lost later in the month after Morgan Stanley initiated coverage on the stock with an overweight rating, estimating that the air taxi business could grow to be a $1 trillion-per-year industry by 2040.
Joby has started October off on a sour note, falling nearly 10% as of midday Oct. 4. Whatever one thinks of the company's long-term prospects, continued turbulence is to be expected.
Joby is a $5.5 billion market capitalization company that is pre-revenue. The idea of electric air taxis is intriguing, and could be a green way to cut down on intracity congestion and reduce the number of airline flights of fewer than 150 miles. But that will all take time, and in the meantime, there isn't much more than hope and promise supporting that valuation.
Investors should keep their seatbelts fastened.