Intuitive Machines shares are facing heavy selling pressure after the space exploration company announced plans to raise up to $500 million through a new stock offering. The news has raised immediate concerns among investors about stock dilution, despite the company’s recent massive market gains.

The Dilution Threat Shakes Investor Confidence

The share price immediately fell to $34 on the news of an at-the-market equity scheme. A group of ten major underwriters, including Barclays and Deutsche Bank, will manage the sale and take up to a 3% commission on completed transactions.

It was a shock and ended a sensational run of victories. The shares of LUNR had surged 54% just weeks earlier in anticipation of a growing space economy and industry events such as the ongoing SpaceX public offering. However, market sentiment turned fast around and the stock now trades below $35 following the peak near $47.

A Major NASA Contract Miss

In addition to the stock offering, the reason the sale occurred was due to a major setback from NASA. The space agency passed over Intuitive Machines for its Lunar Terrain Vehicle program. NASA did not choose competitor companies such as Astrolab, Lunar Outpost, and others.

This vehicle program is vital to the future of long term Moon exploration, and leaving the contract behind prompted questions about the company’s continued involvement in the lucrative Artemis ecosystem.

Strong Financials Offer a Silver Lining

Even with the markets in besiege mode the underlying business is in pretty good shape. Intuitive Machines reported record revenue of $186.7 million in its first quarter accompanied with positive adjusted EBITDA.

Management’s record $1.1 billion contract backlog is another plus. This includes an additional $180.4 million NASA contract for its enhanced Nova-D lunar lander program.

Moreover, the Company’s management is actively engaged in the process of transformation to a stable provider of space infrastructure. Recent acquisition of Lanteris Systems with $800 million and future acquisitions of deep space communication assets will generate dependable, regular income from satellite navigation and relay services.