Archer Stock Plunges 8% Following Share Offering and LA Airport Land Deal

Archer Aviation (ACHR) shares took a hit, sliding 8% in after-hours trading following the announcement of a substantial share offering. This market reaction overshadowed the company’s third-quarter earnings, which, while still reflecting a net loss, managed to beat analyst expectations.

The company reported a net loss of $129.9 million, a figure considerably lower than the FactSet consensus estimate of a $178.6 million loss. This narrower loss suggests improving operational efficiency and cost management within the burgeoning electric vertical takeoff and landing (eVTOL) sector.

However, the positive momentum from the earnings report was quickly tempered by the news of a $650 million stock offering, involving the issuance of 81.25 million shares. This capital raise is earmarked to finance Archer’s $126 million acquisition of Hawthorne Airport in Los Angeles. Strategically, this acquisition positions Archer to establish a key hub for its planned air taxi operations, particularly as it aims to capitalize on its selection as the official air taxi provider for the 2028 Los Angeles Olympics.

From an investor perspective, the share offering introduces a significant dilution risk. The weighted average of outstanding Archer shares has already increased substantially year-over-year, climbing from approximately 397.5 million to 660.9 million. This dilution naturally reduces the ownership stake and potential earnings per share for existing shareholders.

The eVTOL industry has seen a surge in investor interest, fueled by advancements in technology and regulatory progress. The recent public listing of Beta Technologies on the NYSE underscores this growing confidence in the sector’s long-term potential.

Archer, along with major competitors like Joby Aviation, is actively pursuing Federal Aviation Administration (FAA) certification, a pivotal milestone for commercial viability. This rigorous certification process involves extensive testing and validation to ensure the safety and reliability of eVTOL aircraft.

Archer’s Midnight aircraft recently achieved a record altitude of 7,000 feet during flight testing, marking a significant engineering and operational achievement. Prior to this, the company completed its longest piloted flight, demonstrating increasing confidence in the aircraft’s performance capabilities. These milestones are crucial for demonstrating the technological maturity required for FAA approval.

Archer is also strategically diversifying its operational footprint, with a significant focus on the United Arab Emirates (UAE). This regional expansion mirrors the competitive landscape, with Joby Aviation pursuing partnerships in Saudi Arabia, highlighting the intense global competition to establish market dominance in the nascent air taxi industry.

Looking ahead, Archer anticipates an adjusted EBITDA loss between $110 million and $140 million for the current quarter, translating to a midpoint loss of $125 million. This outlook is slightly above the FactSet analyst consensus estimate of a $119.9 million loss, potentially reflecting ongoing investments in research, development, and infrastructure.

The broader market sentiment towards eVTOL companies remains volatile. Joby Aviation, for example, recently reported a wider-than-expected third-quarter loss, contributing to a 20% decline in its share price over the past week. Despite these short-term fluctuations, both Archer and Joby have experienced substantial growth in market capitalization over the past year, suggesting a continued, albeit cautious, optimism from investors regarding the long-term prospects of the urban air mobility sector. The key to sustained growth lies in achieving FAA certification, scaling production efficiently, and demonstrating a clear path to profitability.