Draganfly's $50M Equity Raise Meets Downside Trigger Amid Persistent Revenue Shortfall

What happened

Draganfly announced the closing of a $50 million registered direct offering at $7.00 per share, issuing approximately 7.15 million new shares. This move continues a pattern of serial equity issuance, with the company raising over $90 million in 2025 alone to fund operations despite ongoing losses. Critically, the offering size exceeds the $30 million threshold identified in the DeepValue report as a downside catalyst when quarterly revenue remains below $3 million. Recent financials show Q3 2025 revenue of $2.16 million, still under this mark and flat year-over-year, indicating no material progress in scaling defense or U.S. operations. Consequently, while bolstering the cash balance, this capital raise exacerbates dilution concerns and highlights management's reliance on external funding rather than operational cash flow.

Implication

Investors face immediate dilution from the new shares issued at $7.00, reducing per-share value as the share count expands. The raise confirms management's ongoing dependence on equity markets to fund losses, undermining claims of near-term profitability. With revenue stagnant and gross margins around 20%, the valuation becomes more stretched, risking a re-rating toward cash value if defense contracts fail to materialize. This could pressure the stock toward the report's bear case implied value of $6.00, as confidence in a rapid revenue ramp wanes. Long-term, unless Draganfly achieves quarterly revenue above $4.5 million with improved margins, further equity issuances from its C$300 million shelf are likely, perpetuating dilution and eroding shareholder equity.

Thesis delta

The DeepValue report's thesis included a specific condition where issuing over $30 million in new equity with quarterly revenue below $3 million would decrease the investment call. This news meets that condition, shifting the thesis toward a more negative outlook by increasing the probability of the bear scenario. Consequently, the 'POTENTIAL SELL' rating is reinforced, with implied value likely trending downward from the base case of $7.00 as dilution and execution risks mount.