Joby Aviation Nosedives 18%. What the Heck Is Going On?

Joby Aviation (NYSE:JOBY | JOBY Price Prediction) leads in developing electric vertical takeoff and landing (eVTOL) aircraft for urban air mobility. The company is advancing toward commercial operations in 2026, with plans to carry its first passengers in Dubai and participate in the FAA’s eVTOL Integration Pilot Program to test use cases nationwide. Joby has completed three of five FAA certification stages and expects to begin passenger flights in early 2026, partnering with Delta Air Lines (NYSE:DAL) for routes in New York and Los Angeles. 

Yet its stock has traded erratically in a narrow band over the past four months, following a surge to $20.39 per share in August after an early-year climb from lows around $5. Today, shares plunged 18% to around $11 per share. What the heck is going on?

The Need for Fresh Capital

As Joby gears up for commercialization, it faces mounting costs to certify its aircraft, scale manufacturing, and prepare operations. The company plans to double production to four aircraft per month by 2027, requiring investments in facilities like its new Ohio site and equipment for round-the-clock output in California. 

To fund this, Joby announced concurrent offerings this morning: $600 million in convertible senior notes due 2032 and 52.86 million shares of common stock at $11.35 per share. This upsized raise totals about $1.2 billion before options, up from an initial $1 billion target. Proceeds will support certification, manufacturing expansion, commercial prep, and general purposes, bolstered by Joby’s $978 million cash position at the end of the third quarter.

Breaking Down the Convertible Notes

Convertible senior notes are unsecured loans that investors can turn into company shares at a fixed rate. Joby’s notes pay a low 0.75% interest annually, distributed twice a year starting Aug. 15, and mature on February 15, 2032. They convert at an initial rate of 70.4846 shares per $1,000 of principal, which works out to a $14.19 conversion price — a 25% premium above the $11.35 stock price in the recent offering. 

Conversion is restricted until November 17, 2031, except in certain cases, after which it becomes freely allowed until near maturity. Joby can repay conversions in cash, shares, or a combination.

The 0.75% interest rate is very low for debt because investors get the potential upside of converting to equity if the stock rises. Convertible notes like these typically carry lower interest than regular (non-convertible) bonds, making them a cheaper way for Joby to borrow.

Joby used $55 million of the proceeds to buy what are known as capped call options from counterparties. These are derivatives in which Joby purchases call options on its own shares with a strike price of $14.19 — but capped at $22.70 (a 100% premium over $11.35). The capped calls help reduce share dilution from conversions: they offset the shares Joby must deliver (or their cash equivalent) when the stock price is between $14.19 and $22.70. Above $22.70 per share, and the protection ends.

Overall, this structure effectively lifts the “real” conversion price to $22.70, shielding existing shareholders from heavy dilution while letting Joby raise money at a low cost.

Why the Market Backlash?

The capital raise strengthens Joby’s balance sheet for 2026 goals, like its UAE service launch and U.S. pilot programs. Net proceeds of  $583 million from the notes and $576 million from stock — potentially more if options are exercised — is a positive long-term, funding growth mechanism without high-interest debt. 

However, markets are reacting negatively to the immediate dilution that occurs from the 52.86 million new shares — about 7% of outstanding shares — and potential future shares from conversions. The $11.35 pricing, a 15% discount to yesterday’s closing price of $13.37 per share, amplified the selling pressure. 

A separate delta offering of 5.29 million borrowed shares for hedging added volatility. Analysts note such reactions are common for growth firms, as dilution fears overshadow any strategic benefits.

Key Takeaway

Joby shares now trade at $10.97, near last July’s levels around $9.81 to $10.50 per share. This dip could offer an attractive entry point for investors betting on eVTOL aircraft reshaping transportation, with Joby’s Dubai debut and U.S. partnerships indicating it has momentum. 

Yet there are risks: eVTOL is still an emerging, unproven industry that still needs to show there is consumer demand for urban air taxis. Public acceptance requires time, and while aviation and auto sectors show interest, viability hinges on certification and adoption. The thesis may unfold slowly, but at this reduced valuation, Joby remains an attractive pick for those optimistic on aerial mobility.