Drone Maker AIRO Shares Fall. It’s Selling Stock.

Ukraine has used AIRO Group’s RQ-35 Heidrun reconnaissance drones in its fight. (Chris McGrath/Getty Images)

Drone maker AIRO Group is raising money to make more drones.

The company announced late Monday it would sell 3.5 million shares at $20 apiece, raising about $70 million. The money will be used mainly for funding growth initiatives, like the recently announced joint venture with Nord Drone.

Earlier Monday, AIRO group announced the deal with Nord, a Ukrainian-based manufacturer of combat drones. The partnership aims to expand Nord Drone manufacturing to about 25,000 drones per month from 4,00o.

Taking advantage of growth opportunities is good, but selling more stock can send any stock lower in the short run. AIRO stock fell 6.6%, closing at $19.15, while the S&P 500 and Dow Jones Industrial Average rose 0.3% and 0.4%, respectively. Shares closed Monday at $20.50, a little above where the company plans to sell stock.

AIRO just raised about $60 million in an IPO. In June, the company sold six million shares at $10 each. Shares traded as high as $39.07 after the IPO before settling down around $20.

The company operates in four business segments: drones, avionics, training, and electric air mobility. Avionics refers to flight controls. Electric Air Mobility refers to eVTOL, or electric vertical takeoff and landing aircraft, a segment that has yet to generate sales. AIRO is planning to build hybrid drones for cargo markets, a little like a last-mile delivery truck in the air.

Most of its revenue comes from the drone business. The company’s AI-enabled Sky Watch drones are sold to NATO and used in Ukraine.

Sales in 2026 are expected to be about $170 million, up from $120 million expected in 2025, according to FactSet. Earnings before interest, taxes, depreciation, and amortization, or Ebitda, are expected to be $21 million in 2026, leaving the stock trading for about 26 times estimated 2026 Ebitda.

Larger drone makers AeroVironment and Kratos Defense & Security Solutions trade for about 31 times and 64 times the estimated 2026 Ebitda, respectively, according to FactSet.

Coming into Tuesday trading, AeroVironment and Kratos shares were up 54% and 143%, respectively. Increased focus on unmanned systems at the Defense Department has boosted investor sentiment.

Write to Al Root at allen.root@dowjones.com