Shares of Kratos Defense & Security Solutions (NASDAQ:KTOS) fell 4.7% in after-hours trading following the companys confirmation that it will offer $1 billion of its common stock in an underwritten equity sale.
Under the terms disclosed by the company, the underwriting group will have a 30-day option to purchase up to an additional $150 million of shares. All securities to be sold will come from Kratos and will be issued under an effective shelf registration statement on file with the U.S. Securities and Exchange Commission.
Kratos said the expected net proceeds from the offering will be used to fund acquisitions targeted at specific customers and programs. The company also outlined plans to allocate funds toward investments and capital expenditures intended to scale its operations in support of large national security priorities tied to existing programs, recent awards and pipeline opportunities. Any remaining proceeds will be used for general corporate purposes, including payment of fees and expenses related to the offering.
The company identified the banks serving as joint book-running managers for the proposed offering: Baird, Raymond James, RBC Capital Markets and Truist Securities. Kratos emphasized that the offering remains subject to market conditions and other customary factors that may affect completion.
Kratos is a technology company that serves defense, national security and commercial markets. Its business areas include virtualized ground systems for satellites, jet-powered unmanned aerial drone systems, hypersonic vehicles and rocket systems, and microwave electronic products used in missile, radar and space systems.
The firms announcement and planned share sale prompted the immediate market reaction noted above. The company did not disclose additional financial details or timing beyond the terms of the offering and the underwriters 30-day option.
Context and implications
By raising capital through an equity offering, Kratos is signaling an intent to expand by acquiring capabilities and investing in production and program scale-up tied to national security work. The transaction is structured to permit the underwriters a short-term additional allotment, and is contingent on prevailing market conditions.