Why Boeing has sold shares worth $21 billion
What's the story
Boeing has raised nearly $21 billion through an expanded share sale, making it one of the largest capital increases by a public company. The move is aimed at bolstering its finances and avoiding a possible credit rating downgrade to junk status, which would make it harder for the company to borrow money. The US aircraft manufacturer sold 112.5 million common shares at $143 each, at about 7.7% discount from Friday's closing price of $155.01, the company said in a statement.
Share sale
Additional $5 billion raised through depositary shares
Along with common shares, Boeing also raised another $5 billion by selling depositary shares. The company's stock fell 2.8% on Monday in New York, closing at $150.69. The dip is part of a larger trend that has seen Boeing's share value plummet by about 42% this year alone, making it one of the worst-performing stocks in the Dow Jones Industrial Average.
Financial hurdles
Capital infusion addresses Boeing's financial challenges
The capital infusion comes as a solution to one of the biggest problems of Boeing's new CEO, Kelly Ortberg, amid a financially difficult time for the company. The firm's balance sheet had already been stretched by the COVID-19 pandemic, and two fatal jet crashes of its 737 MAX model. Now, a labor strike in its seventh week is further hindering aircraft production.
Funding requirements
Capital needs and future plans
Boeing needed this capital infusion to maintain its investment-grade rating, and fund its plane production once the labor strike ends. The company is expected to burn through about $4 billion in cash in Q4, taking its total cash burn to about $14 billion for the year. Amid these challenges, Ortberg has started reviewing Boeing's massive portfolio in a bid to simplify operations.
Strategic moves
Future strategies and SEC clearance
Boeing is also looking at the future of its troubled Starliner space capsule program as part of Ortberg's review. On October 23, the firm received clearance from the US Securities and Exchange Commission to sell up to $25 billion of equity and debt. Boeing has also secured a new credit agreement for $10 billion, giving it "additional short-term access to liquidity as we navigate through a challenging environment."