Archer Aviation (ACHR +1.50%) has secured important new funding from a partner as it moves toward production of its small electric plane. But the funding came at a steep price for existing shareholders.
Archer stock is down 10% as of 10:30 a.m. ET on Friday following the announcement.
Building the cash pile ahead of production
Archer is one of a handful of companies working to commercialize electric vertical takeoff and landing (eVTOL) aircraft. Its plane, which would be capable of taking off and landing like a helicopter, would ferry a handful of passengers over crowded roads or work in partnership with airlines to transport passengers to larger jets.
Archer lost $106.9 million in its most recent quarter as it works to build out its manufacturing footprint and secure regulatory approval ahead of a planned 2025 launch. With that goal in mind, Archer also announced a new $175 million private placement from existing investors including Fiat Chrysler parent Stellantis, as well as United Airlines Holdings.
The funding deal involves the sale of 49.3 million shares of Archer stock. The company also entered into a subscription agreement with Stellantis involving nearly 3 million additional shares to offset Stellantis labor costs in assisting with the development of the Midnight aircraft.
Archer had 319.4 million shares of its Class A stock as of Aug. 2, and 36.1 million shares of Class B stock.
NYSE: ACHR
Key Data Points
Is Archer a buy?
Adding new shares typically leads to price declines, as each existing share is worth a little less of the overall company. But share issuances can still work out for existing holders if they provide the capital needed to push a company forward.
Archer has an order book of up to $6 billion in potential orders from customers including United and Southwest Airlines. It also has plans in the works for air taxi networks in Los Angeles and other crowded markets that would coordinate with airline partners.
eVTOLs remain a risky, unproven technology, but Archer is near the front of a crowded pack of start-ups vying to bring the technology to commercial markets.
Investors should not be discouraged but should continue to limit Archer to a small part of a well-diversified portfolio.
