Space infrastructure company Redwire (RDW -20.13%) is raising cash to shore up its balance sheet, but the move comes at a cost to existing investors.
Shares of Redwire traded down 20% as of 10:15 a.m. ET after the company announced a $200 million secondary offering.
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Building out the balance sheet
Redwire is a relatively young space stock focused on building the infrastructure necessary for space stations or eventual Moon colonies. The company has some high-profile potential contracts and big plans for the future, but with just $300 million in revenue last year and a market cap north of $2.2 billion, a lot of that potential is arguably already priced in.
On Monday evening, Redwire announced an offering of up to 17.8 million shares at $16.75 per share, raising gross proceeds of at least $260 million to be used for general corporate purposes. Prior to the offering, Redwire had about 126.85 million shares outstanding, meaning each existing share would own slightly less of the business.
The deal was also priced at a discount to Redwire's Monday close of $20.57.
The stock dilution, and the discount, are common with secondary offerings. But they do tend to cause an outsized near-term reaction in the share price, as is the case here.
Is Redwire a buy?
The good news for investors is that if Redwire can accomplish what the company hopes to accomplish, this near-term dilution will soon be a distant memory and not thesis-busting. The bad news is Redwire is very much a work in progress, and there are no guarantees.
The company is moving forward with its planned $925 million cash and stock acquisition of Edge Autonomy, adding to its drone tech expertise. If the space economy develops as Redwire hopes, they should be well-positioned to benefit.
