Intuitive Machines (NASDAQ: LUNR) stock tumbled 14.2% through 9:45 a.m. ET Wednesday morning after the space company made two disturbing announcements in 24 hours. First, last night after close of trading, Intuitive announced plans to issue and sell up to $73.9 million worth of new common stock in an underwritten public offering (including an overallotment option); and to further sell $10 million in new stock via a private placement (so $83.9 million total). The Fly noted that the company was targeting a share price of between $10.25 and $11.25 for the offering.
This morning, Intuitive Machines "upsized" the offering -- but downsized the price to near the bottom of that price range. In a press release early Wednesday, Intuitive said it could end up selling approximately 10.8 million shares in the public offering, and 952,381 in the private placement -- approximately 11.75 million shares total, yielding $123.4 million in total cash.
One of Intuitive Machines' shareholders will also be selling a small number of shares as part of the transaction, but the company will not receive any of the cash from that sale.
Intuitive Machines intends to use the cash from its share sale "for general corporate purposes, including operations, research and development and potential mergers and acquisitions" -- and Intuitive could certainly use the cash.
According to data from S&P Global Market Intelligence, Intuitive burned through more than $75 million in free cash flow last year, and cash burn has increased this year. Although Intuitive has won several lucrative contracts from NASA, Wall Street analysts don't expect it to turn free-cash-flow-positive and begin earning profits until 2026.
This new cash might suffice to bridge that gap -- to keep the doors open until Intuitive is generating cash on its own without share sales. Still, adding 11.8 million shares to an 80.9 million share count will dilute existing shareholders out of 14.5% of their current ownership stake.
Looked at that way, Intuitive's 14.2% stock price decline makes a lot of sense.
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Rich Smith 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.