Friday probably didn’t come fast enough for space exploration equipment specialist Redwire (NYSE: RDW). After all, according to data compiled by S&P Global Market Intelligence, its share price fell by nearly 17% this week. A dilutive share issue and the closing of a pricey asset buy were two key factors in that double-digit dip.
Share dilution time
On Monday after market close, Redwire announced that it is floating a secondary issue of its common stock, and the following day divulged that the issue is being upsized.
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Ultimately, Redwire aims to float just over 15.5 million such shares at a price of $16.75 apiece, for total gross proceeds of roughly $260 million. Also, the underwriters of the issue have been granted a 30-day option to collectively purchase up to an additional 2.3 million-plus shares.
Redwire said that it will use the net proceeds of the flotation for purposes such as balance sheet strengthening, the repurchase of convertible preferred stock outstanding, and debt retirement.
Investors rarely greet news of share dilution warmly, and this issue certainly qualifies — at the moment, Redwire’s outstanding common share count is less than 142.6 million.
A competitive Edge?
While it’s going to the well for more funds, at the same time, Redwire is about to spend a pile.
On Wednesday, private equity firm Sleeping Bear Capital announced the completion of its sale of Edge Autonomy to Redwire. The deal, valued at over $1.1 billion, gives the company an unmanned aerial vehicle (UAV) developer that has contracts with federal agencies, as well as public-sector clients abroad.
Since Redwire is still at a relatively early stage in its business life, it has to take available opportunities to keep its finances strong, and to grow. Dilution isn’t pleasant, of course, but hopefully the company will manage to deploy that fresh capital smartly and efficiently. We can say the same for its ownership of Edge Autonomy.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
