What happened

On Thursday, we warned that aerospace start-up Lilium (LILM 5.36%) was likely to go to market with a capital raise in the near future. On Friday, the company did indeed launch a secondary offering.

Investors were apparently not prepared for the move, leading shares of Lilium to fall as much as 10.6% in Friday trading. As of 1:32 p.m. ET, the stock was down 9.3%.

So what

Lilium is focused on designing and manufacturing electric-powered vertical takeoff and landing (eVTOL) aircraft. It is a potentially exciting new technology and could be a green way to bypass traffic jams and replace fuel-guzzling small planes, but the technology is still in the early stages of development and there is a lot of competition.

Investors were rattled after one of Lilium's rivals, Joby Aviation, pushed back its timetable for receiving regulatory approval to fly. Joby was thought to be one of the leaders in the race to bring an eVTOL to market. And if it doesn't expect to launch service until 2025, it seemingly means others, like Lilium, are going to need a substantial cash cushion to get to a point where they can generate revenue.

Lilium is indeed boosting its cash position. On Friday, the company announced the pricing of a $119 million capital raise from existing shareholders and new investors including Honeywell and members of the management team and board of directors. The company is selling more than 91 million of its ordinary shares at a price of $1.30 apiece, and about 45 million in warrants, in a private placement.

The offer price is a discount to Lilium's market price, which is often the case with secondary offerings to ensure that there is ample demand for the new shares. It would also dilute current shareholders by adding substantially to the company's nearly 300 million shares outstanding.

Now what

Neither a growing share count nor a declining share price are bits of good news. But they are both a lot better than running out of money. Lilium's move here is prudent, even if it is a near-term disappointment for shareholders.

The jury is still out on eVTOLs, and there are a number of potential winners and losers among the group of companies trying to bring them to market. Lilium faces a long, uphill climb to become a successful public company. But the fresh capital, and fresh endorsement from key partners that are helping to provide that capital, is a step in the right direction.

If one day Lilium planes are supplementing airline flights and taxi rides with their energy-efficient operations, this offering will just be a footnote in a long corporate story. This is a high-risk stock, but there is enough potential here for investors to consider Lilium for a small part of a well-diversified portfolio.