In recent years, some growth investors have taken a keen interest in electric vertical take-off and landing (eVTOL) aircraft stocks. One of the favorites among retail and institutional investors alike is Archer Aviation (ACHR -0.98%), whose electric air taxis are promising to revolutionize the mobility industry.
Archer is currently the 11th-largest position across Ark Invest's portfolio, which is managed by popular tech investor Cathie Wood. On June 13, shares of Archer plummeted by 14%. Despite such a precipitous drop, Wood flew in and scooped up 3,433,807 shares across her exchange-traded funds (ETF).
Does Wood know something Wall Street doesn't about Archer?
Let's dig in and explore what may have caused Archer shares to drop in the first place. From there, investors may have a better idea of what influenced Wood to buy the dip in Archer stock recently.
Wood just bought the dip, but...
As the graph below illustrates, Archer stock began selling off right out of the gate following the opening bell on June 13. But why? Well, after taking a look at the company's most recent filings with the Securities and Exchange Commission (SEC), I think I have the answer.
In its recent 8-K filing, Archer disclosed that it entered into a securities purchase agreement and issued 85 million shares at a fixed price of $10.
Essentially, Archer sold stock at a fixed price in an effort to raise capital. While such a move is a quick way for companies to raise cash, issuing stock is also dilutive to shareholders -- hence, the share price dropped.
On the surface, it might seem that Wood simply pounced on Archer's depressed price action. However, after exploring further notes in the company's filings, I think there might be more to the picture.
...there could be more to the picture here
Archer stated that it will be using the proceeds of the stock sale for "the development of necessary commercial capabilities, including infrastructure, to support our Launch Edition program; our planned U.S. commercial launch, including our new strategic partnership as the official air taxi provider for the 2028 Olympics in LA; and the development of an AI-based aviation software platform, and the remainder for general corporate purposes."
There is a lot to unpack there.
First, the company's mention of an artificial intelligence (AI) aviation software platform is a reference to Archer's partnership with Palantir. This is important because it underscores Archer's commitment to transform the air mobility market -- from developing new vehicle types to next-generation aviation software platforms.
In addition, raising cash now could suggest that Archer is closer to a commercial launch than some investors may realize. Taking this a step further, recent administrative actions from the president could be a tailwind for Archer as it seeks FAA approval and makes good on its position to be a transportation provider during the 2028 Olympics.
Given Wood has been a longtime Archer bull, I think the savvy investor is well aware of these various initiatives and decided to double down on Ark's position during the recent sell-off.
Image source: Getty Images.
Is Archer Aviation stock a buy?
One on hand, I'm encouraged that the recent sell-off in Archer stock wasn't due to a poor earnings report or some sort of unexpected operational setback at the company. Rather, the capital raise was a planned event and shares slid over the dilution.
At the same time, though, I still see Archer as a speculative stock to own right now. I find the company's various projects intriguing, to say the least. But until Archer is manufacturing aircraft at scale and generating consistent revenue and profits across its various applications, I'm hard-pressed to own the stock myself.
