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Redwire (RDW) shares are extending losses on June 10 after the space infrastructure company announced a new at-the-market (ATM) equity offering.

The company has entered into an equity distribution agreement with a syndicate of investment banks, authorizing it to sell up to $500 million worth of its common stock.

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RDW stock has been in a sharp downtrend this month, currently down more than 40% versus its high in late May.

At-the-market offerings are structurally bearish for existing shareholders because they allow a firm to drip new shares into the open market at prevailing prices over time.

This creates a dilution threat with no fixed ceiling on timing.

For RDW shares, the concern is particularly amplified by scale; at $500 million, the proposed ATM offering is substantial relative to the company’s market cap of less than $3 billion as of writing.

Note that Redwire has recently slipped below its 20-day moving average (MA) as well — a technical development that often accelerates bearish momentum in the subsequent trading sessions.

Investors must exercise caution in trading Redwire shares also because of the company’s financial fragility.

In its latest reported quarter, the NYSE-listed firm lost $77 million — a sharp increase from just $3 million a year ago, with free cash flow coming in at a negative $13 million.

Crucially, options pricing has turned bearish for the near term as well.

The put-to-call ratio on contracts expiring late June sits at 1.29x currently, indicating a strong dovish skew, with the lower price set at $11.59 signaling the stock may crash another 22% over the next two weeks.

And it’s not like RDW pays a lucrative dividend to incentivize ownership despite this derivatives market warning sign.

RDW stock isn’t attractive to buy on the dip because Wall Street analysts are not particularly constructive on it anymore.

While the consensus rating on Redwire remains at “Moderate Buy,” the mean price target of $15.67 is roughly in line with the current price.

On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com