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Why BlackSky Stock Just Blasted Off

By Rich Smith – Oct 25, 2021 at 3:24PM

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Good news from an S-1 filing? That never happens!

What happened

Shares of recent special-purpose acquisition company (SPAC) IPO and NewSpace company BlackSky (BKSY 2.83%) are...behaving strangely today, first spiking more than 20%, then retracing to an 11.9% gain as of 3 p.m. EDT, after the company filed its post-merger Form S-1 registration statement with the Securities and Exchange Commission (SEC).

Now, if you've been watching the SPAC space for any length of time, you know that the filing of an S-1 statement is usually the cue for a stock sell-off. The announcement of a flood of shares coming on the market, potentially depressing the prices of shares already trading, often spooks investors. For some reason, though, that's not happening with BlackSky today.  

Space shuttle blasting off into a black sky

Image source: Getty Images.

So what

Why isn't it happening? At first glance, it doesn't seem to make much sense. After all, in today's filing, BlackSky registered a total of 106.4 million shares of common stock that could potentially begin floating in the future, plus a further 8.3 million warrants for the purchase of shares (which are included in the 106.4 million).

That's a lot of shares, and a lot of reason for existing shareholders to be nervous.

Now what

On the plus side, though, as the S-1 filing makes clear, about 24.1 million of these shares will only be issued and become publicly traded upon the exercise of warrants, and those warrants will only become profitable to exercise once the share price of BlackSky stock exceeds $11.50, or even, in the case of some warrants, $20 a share. With BlackSky stock currently trading below $11, however, it's unlikely these warrants will in fact be exercised, and if that's the case, as much as 16% of the shares just registered will actually never be issued -- and will never dilute shareholders.  

Unlikely as it may seem, there's always the possibility that shareholders could get so excited over today's news that they end up bidding the stock up past the exercise price! 

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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