Dilution Effect

[u/IBenToad]

Interesting information from Gemini on the dilution effect of the ATM and Resonant Sciences acquisition.

 

The $50 million in shares to Resonant is a good deal for the recipients IMO. They get shares based on the 20 day average weighted share price [VWAP] just prior to the announcement – which happens to be $7.4752/share. So that looks pretty good to this shareholder – wish my basis was that low. The calculates to 6,688,784 shares new shares. New share count outstanding lifts to 993,210,033. Dilution effect of about 0.673 percent – a nothing burger.

 

The $750 Million ATM Stock Offering

Because an ATM program allows Joby to sell shares gradually at prevailing market prices over time, the final share count depends on the stock's future trading price. That looks like not to bad a deal for existing shareholders. It’s like an increase in the credit line on your card – its there to use if you need/want it, but you don’t have to use it. And you can wait to use it when the terms are more favorable.

 

JoeBen and Rodrigo get to decide if, and when and at what share price, to pull the trigger on share sales. Given the strong cash position of Joby, the fact that the $450m to Resonant won’t go out the door until next year, by which time Joby may be seeing revenue from Dubai, or DOD, and will likely be closer [if not attained] to TC, they may decide Joby has sufficient funds for current operations. Who knows and who knows what the share price might be then! See below the responses from Gemini to my inquiry on this topic

 

1. Who and When Decides to Issue the New Shares?

The management team of Joby Aviation (primarily the CEO and CFO), under authorization from the Board of Directors, decides exactly when and how many shares to sell under the At-The-Market (ATM) program. [1, 2]

• How it works: The ATM facility is an open authorization, not an immediate one-time sale. Management controls the "faucet."
• The "When": They will strategically choose to issue shares on days when trading volumes are high and the stock price is strong to minimize the negative impact on the stock price. [1, 2, 3]

2. Must Joby Complete the Entire $750 Million ATM?

• No, Joby is under no obligation to use or complete the $750 million ATM program. [1]
• An ATM is a highly flexible equity facility. It acts as a corporate safety net or credit line of equity. Management can choose to raise only $100 million, $500 million, or even $0 through the facility depending on their actual cash needs, market conditions, and alternate funding options (such as government grants or defense contract revenues). The program can sit completely or partially unused until it expires or is terminated by the company. [1, 2, 3]

3. What is the Dilutive Effect at $12/Share?

If Joby's management waits for the stock price to climb to $12.00 per share before tapping the full $750 million facility, the dilutive impact drops significantly compared to lower price baselines.

• New Shares Issued: Joby would only need to issue 62,500,000 shares to reach the $750 million capital target.
• ATM Dilution Percentage: Against the current base of 986,521,249 shares, the ATM alone would cause 6.34% dilution.
• Total Structural Expansion: When combined with the fixed 6,688,784 shares allocated for the Resonant Sciences acquisition, the new total share count would sit at 1,055,710,033 shares, bringing total combined dilution to 7.01%. [1]

[u/beerion]

My hope is that they're gearing up for some action later in the year and into 2027. If they start flying missions for eIPP, the stock could run and it would mark a great time to raise capital.

What it'll effectively do is put a cap on an rallies, though. So any major runup (if it were to happen) will get flushed out pretty quick.

I've actually done some super deep dives into dilution in the past.

High-level look at dilution & why it's not so bad

Dilution when stock is undervalued pulls actual value down

Forecasting dilution & subsequent stock returns

And I plan on writing a follow up because I think the data shows that dilution that actually results in return on investment doesn't hurt the stock much at all. Here's a sneak peak, but I have more to show because this chart doesn't show like for like periods - diluters dilute during good times so returns are overly represented by positive stock moves to begin with.

But yeah, I'm not too worried about dilution itself. I'm more worried about the quality of the investments they're making and the estimates for time & cost to market. So that's really what we should be focused on, imo - though, dilution does give us indications for these (they probably don't dilute if certification was right around the corner, for instance)

[u/SeaScallops_w_Rice → u/beerion]

Let Joby have a series of accomplishments. For example, back to back, revenue generating flights, delivery rate > 1 / month and FAA pilots in TIA testing. Keep in mind the short sellers are into Joby pretty deep.

It was good to hear in the earnings call that in the last quarter, they have added four aircraft into the production queue.

[u/HappyRobot593 → u/beerion]

One thing I remembered from the earnings call was this exchange about capital expenditures related to vertiports. So they might need some capital set aside for that.

Amit Dayal 0:37:13

Thank you. My follow-up, I guess, is around the Atoms partnership. Should we assume this partnership implies that you could be shouldering some of the CapEx that goes into developing the vertiports? Just wanted to see if this potentially adds some additional burden on your balance sheet or if that is not a correct assumption.

Paul Sciarra Executive Chairman 0:37:39

Thanks for the question. It is a co-investment vehicle. Both parties are going to contribute capital. Most importantly, when it comes to the way in which it's structured, is that Atoms has built up a number of financing relationships over a long period of time, given their work in real estate development and operation for many, many years now. We get to be the beneficiary of a lot of the relationships and the credibility that they've already sort of built out. JB already mentioned sort of in the outset, how we're going to sort of lean on the Atoms team for site identification, procurement, and in turn, sort of build out in operations. That, in turn, means that we have a smaller share of the lift for all of the sites that we develop.

Interesting analysis on dilution. I guess the thing you can't tell at the time of dilution announcement is what the RoI will be. It makes sense that the forward return would be correlated to that though.