Kodiak AI raises $100 million at a deep discount, sending its shares down 37%.

Kodiak AI stock fell 37% in after-hours trading Thursday after the self-driving truck startup revealed it had raised $100 million by selling stock at a deep discount — a sign that investors were willing to back the company but not at the current market price.

The company sold shares at $6.50 per share, well below the closing price of $9.10, according to a filing with the Securities and Exchange Commission (SEC). The increase also included warrants — instruments that give investors the right to buy additional shares later at a specified price, in this case up to $6.

Funding came from existing backer Ares Management and several unnamed institutional investors.

The influx of capital comes as Kodiak moves forward with the costly task of scaling its self-driving truck business, which spans off-road industrial areas and public highways, with the ultimate goal of spending less than it ultimately earns. Kodiak reported revenue of $1.8 million in the first quarter, up from the $1.4 million it reported in the same period a year earlier. The company’s loss from operations amounted to $37.8 million, double what it announced in the same period last year.

These numbers help explain why discount terms worry investors. The company is burning through cash quickly, and the increase — while significant — doesn’t do much to change those calculations in the near term.

Kodiak has made some recent progress on the business front, including a new commercial contract with Roehl Transport, a pilot program to test Kodiak-equipped self-driving trucks on West Fraser Timber Co.’s timber hauling operations. in Alberta, Canada, collaborating with military vehicle maker General Dynamics Land Systems to create autonomous ground vehicles for defense applications.

Under the agreement with Roehl, also announced Thursday, Kodiak-equipped trucks will autonomously move freight between Dallas and Houston on four round trips per week. The trucks operate autonomously throughout the journey, but Kodiak keeps a human safety operator behind the wheel as a precaution.

Kodiak founder and CEO Don Burnett said the company is on track to transition to driverless trucking on public highways later this year as operations ramp up.

“We have a lot of long-term initiatives, and bringing in new partners continues to show momentum,” he said in an interview. “We are excited about the progress we are making as we move toward our driverless launch later this year.”

Currently, Kodiak owns the trucks, provides the safe driver, and carries freight for Roehl along with its other existing on-highway customers, including Werner, JB Hunt, Bridgestone, Martin Brower and CR England. But this arrangement will change once we move to driverless trucking operations.

“Our intention is to not have the trucks at that point [but to] The driver model runs as a service, where [customers] “It owns and operates the trucks,” Burnett said, adding that this is the system it is using with its off-road customer Atlas for their driverless deployment in the Permian Basin in Texas.

While Kodiak plans to retire the safety driver by the end of 2026, Burnett said it will not begin driverless operations on public highways until it has finished validating the technology.

“It does work under all the conditions we would expect a driverless launch, but there’s a lot of verification work we have to do, and that’s where we come in with our autonomy readiness metric,” Burnett said, describing the initiative — released Thursday — as a score from zero to 100 to track how complete the Kodiak’s internal safety verification is. As of April, Kodiak was at 86%, Burnett said.

The company, formerly called Kodiak Robotics, went public in September through a merger with special purpose acquisition company Ares Acquisition Corporation II, a subsidiary of Ares Management. The deal valued the startup at approximately $2.5 billion.

At the time, Kodiak had raised $275 million in funding. More than $212.5 million came from some institutional investors, including $145 million in PIPE funding (private investment in public equity, a method in which investors buy shares directly from a public company) and about $62.9 million in cash from Ares. That cash shrank from its initial $562 million as some SPAC investors redeemed their shares — a standard condition that allows SPAC investors to redeem their money before a merger closes.