Archer Aviation (ACHR -9.12%) the stock saw strong sales during Wednesday trading. The flying electric vehicle company’s stock price was down 8.6% as of 11:15 a.m. ET.

Before the market opened this morning, Archer Aviation submitted a filing to the Securities and Exchange Commission (SEC) indicating its intention to create and sell new shares. The company has reached an agreement to sell up to $70 million of new Class A common stock.

Archer sells shares to raise funds

Archer Aviation’s recent stock offering filing has raised concerns about shareholder dilution. As the company issues more shares, the ownership interest previously held by existing shareholders decreases.

In other words, the pie is cut into more pieces – and the pieces shrink in order to accommodate the change. On the other hand, selling stock provides the company with new capital that can be used to expand its business.

In the third quarter, Archer Aviation reported a net loss of $115.3 million on zero revenue. Meanwhile, the company closed the quarter with cash and equivalents totaling approximately $501.7 million. Given the rate at which Archer is spending cash to grow and scale its business, it’s no surprise that the company decided to sell new shares in order to obtain additional financing.

What’s next for Archer?

Even without the recently announced stock offering, the company has already increased its number of shares outstanding by approximately 48% since its IPO through a merger with a special purpose acquisition company (PSPC) in 2021. Given that the company is still in a pre-revenue state and posting significant losses, it is likely that it will continue to offer new shares in order to raise cash. But the company could soon make the transition to generating significant revenue.

Archer appears to be making significant progress towards commercialization and has recently won major contracts in the UAE and Japan. In particular, its contract for the sale of its Midnight flying vehicles to Japanese airlines And SumitomoThe joint venture could generate up to $500 million in revenue.

Archer Aviation is a pioneering player in an emerging product category, but its prospects remain speculative. If the company establishes itself as a long-term winner in the flying taxi space, its stock price is poised to surpass current levels. But investors should keep in mind that success in this area is not guaranteed and that significant obstacles could arise even if the company ends up being successful in the long term.