Kratos Stock Sinks After $484M Offering Priced Below Market; Retail Traders Shrug Off Dilution

Kratos Defense & Security Solutions (KTOS) fell over 6% after hours Wednesday after pricing nearly 13 million shares at $38.50, below its prior close of $40.77.

The stock rose 3.8% to $42.33 on Wednesday, but dropped 6.2% after hours to $39.7.

Kratos expects to raise around $484 million in net proceeds from the sale. 

The company also granted underwriters a 30-day option to buy up to an additional 1.95 million shares. 

The transaction is scheduled to settle on June 27, assuming all standard conditions are met.

In a statement, Kratos said the capital will help fund expansion across mission-critical defense programs, recent contract wins, and high-probability pipeline opportunities. 

Proceeds will also go toward acquisitions tied to customer programs, along with general corporate use, including debt repayment.

A syndicate of investment banks is leading the deal, with Baird, RBC Capital Markets, Truist Securities, and Raymond James serving as joint book-runners.

The equity raise comes as Kratos expands its focus on next-gen military systems. 

Earlier this month, it formalized a teaming agreement with GE Aerospace to co-develop propulsion technologies for autonomous Collaborative Combat Aircraft (CCA) and other unmanned aerial systems, building on a 2023 memorandum of understanding. 

The effort includes developing the GEK800 and GEK1500 engines, which are intended for U.S. Department of Defense programs requiring scalable propulsion solutions.

The offering also follows Monday’s bullish initiation from Stifel, which began coverage on Kratos with a ‘Buy’ rating and $52 price target, citing its diversified growth drivers beyond Valkyrie drones and its potential core profit ramp. 

Stifel also highlighted Kratos’ 200-lb thrust TDI-J85 turbine engine as a key enabler for affordable cruise missile mass.

Benchmark also recently lifted its target to $48 from $40, noting that U.S. defense budget developments point to $600 million in potential incremental funding for Kratos programs. 

Noble Capital and JPMorgan raised their price targets as well, with Noble calling Kratos’ recent awards and demos “further confirmation” of its disruptive tech strategy and JPMorgan pointing to strong positioning in growth segments of the Department of Defense’s industrial base expansion efforts.

On Stocktwits, retail sentiment was ‘extremely bullish’ amid ‘high’ message volume.

One user pointed to Friday’s trading activity, suggesting the dilution was anticipated, noting a large end-of-day candle.

Another user expressed confidence in Kratos' long-term prospects, recalling how a previous dilution was absorbed quickly, allowing the stock to hit new highs. 

The user noted the company’s broad exposure across defense programs and said they trust CEO Eric DeMarco’s decision to raise funds for future growth, even if it brings short-term discomfort. 

They added that Kratos appears stronger now and could recover quickly, potentially heading toward the $50 mark again.

The stock has risen 60.5% so far in 2025.

For updates and corrections, email newsroom[at]stocktwits[dot]com.