Joby Aviation (NYSE: JOBY) is selling additional shares to add to its cash coffers, meaning each existing share is worth a little less today than it was yesterday.

Investors had a negative reaction to the news, sending Joby shares down 14% as of 10:15 a.m. ET.

Raising additional cash

Joby is one of a handful of companies attempting to commercialize small electric aircraft capable of vertical takeoffs and landings, or eVTOLs. Proponents envision these small vehicles one day flying over traffic backups and connecting people living in outer suburbs to major airports.

But the technology is still unproven, and the path to regulatory certification is long. Joby is further along than most, but still faces massive future expenses as it works to secure approval and ramp up manufacturing.

Late Thursday, Joby announced plans to sell 40 million additional shares of its common stock at $5.05 apiece. The deal, which includes an underwriter option to purchase additional shares, would raise the company $202 million after expenses.

Joby said it intends to use the proceeds to fund its certification and manufacturing efforts, prepare for commercial operations, and for general working capital.

Is Joby stock a buy?

It is not unusual for a stock to drop when a secondary offering is announced. The deal adds to the share count and is typically priced at a discount to market price. But investors shouldn’t focus on the near-term reaction.

Joby is pre-revenue and has a lot of bills to pay. The company needs this capital, as well as a $500 million infusion from partner Toyota Motor announced earlier this month, to get to its final destination.

If this funding is the fuel Joby needs to reach revenue-generating operations, the small dilution caused by this offering will be of no consequence to long-term holders. That’s still a big if, and investors should understand the risks that come with a pre-revenue start-up. But for those willing to accept some turbulence, the secondary offering is no reason not to consider Joby as a part of a well-diversified portfolio.

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Lou Whiteman has positions in Joby Aviation. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.