Key insights
- Redwire announced plans to sell up to $500 million in stock at-the-market, causing its stock to tumble. The company is raising cash for working capital and general corporate purposes, including debt repayment and potential acquisitions, due to significant cash burn and losses. This move suggests Redwire may not be generating sufficient cash to sustain operations independently, potentially impacting investor sentiment in the aerospace and defense sector.
Redwire (RDW 15.00%) stock, the space stock that turned itself into a drones stock too when it purchased Edge Autonomy last year, tumbled 14.3% through 10:50 a.m. Tuesday.
It has only itself to blame.
In a filing with the SEC this morning, Redwire announced plans to issue and sell, "from time to time," up to $500 million worth of new stock. No specific price was named for the share offering, with the shares to be sold "at-the-market" -- meaning at whatever price Redwire can get for them, on the day(s) it tries to sell them.
The company plans to use any funds raised through the share sales for "working capital purposes and other general corporate purposes, which may include repayment or refinancing of outstanding debt, financing strategic acquisitions or investments, and financing research and development activities to accelerate the development of our products and solutions."
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In other words, Redwire is raising cash basically just to remain in business. And the reason it's doing this is that Redwire cannot currently generate sufficient cash to remain in business on its own.
According to data from S&P Global Market Intelligence, Redwire burned through just over $155 million in negative free cash flow over the past 12 months, while racking up GAAP losses of more than $300 million. With cash reserves of less than $145 million at last report (and $132 million in long-term debt), Redwire had less than one year before it would run out of cash.
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The good news is that Redwire's stock sale should give the company three years' breathing room before another cash crunch strikes. The bad news is... Redwire may need it. Free cash flow isn't expected to arrive before 2028 at the earliest.