Why Is Sidus Space (SIDU) Stock Down 40% Today?

  • Sidus Space (SIDU) fell after announcing a secondary offering.
  • The offering dilutes the public stake in the company.
  • A unit of Raytheon (RTX) is likely to wind up in control.
SIDU stock - Why Is Sidus Space (SIDU) Stock Down 40% Today?

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The value of Sidus Space (NASDAQ:SIDU) stock, which aims to service commercial space satellites, was cut in half after the company filed a registration statement investors fear will dilute their stake.

The S-1 statement authorizes more than 4.6 million new shares of common stock and an equal number of warrants. As of Jan. 31, Sidus Space had 7.94 million shares outstanding.

Sidus Space was due to open on Jan. 31 at 36 cents per share, bringing its market capitalization below $10 million. It closed on Jan. 30 at 89 cents. Its price peaked at $11 per share. The company came public in December 2021 in a public offering priced at $5 per share. Net proceeds totaled $15 million.

What’s Going on With SIDU Stock Today?

The price of the new shares is $1.08, twice the current market price. Only Class A shares are being offered.  These carry one vote each on corporate matters. Class B shares, held by management, have 10 votes each. Management’s control is not under threat due to the offering.

The warrants would go to buyers whose purchases take their holdings to 5% or more of the common stock. These warrants could be exercised immediately and would decrease the size of the remaining offering. A single purchaser could end up owning one-third of the company but still lack control.

Sidus CEO Carol Craig offered an optimistic view of the company’s prospects on Jan. 5. Sidus had $4.27 million of new purchase orders in 2022, according to the CEO. The company is moving toward launching LizzieSat-1, the space satellite that will provide its services and prove its business model.

During 2022, Sidu also became a subcontractor to Collins Aerospace, a unit of defense contractor Raytheon (NYSE:RTX) that earned $742 million in operating profit on revenue of $5.66 billion in the fourth quarter.

What Happens Next?

If Raytheon buys the offering, it will have a big stake in the company for what amounts to pin-cushion money. Plus, it could buy the rest at its leisure. Public shareholders have no say in the matter, which may be why they’re getting out.

On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack.

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