Boeing Co (BA) shares are taking a hit on Monday morning, following the company’s announcement of a significant $19 billion stock offering. This move comes amidst a turbulent period for the aerospace giant, marked by ongoing production delays and a costly strike that has been disrupting operations.
The offering consists of two parts: 90 million shares of common stock and $5 billion in mandatory convertible preferred stock. Based on Friday’s closing price of $155.01, the common stock offering alone could raise close to $14 billion. The underwriters have also been granted a 30-day option to purchase an additional 13.5 million shares and $750 million worth of convertible stock.
This move comes as Boeing faces a double whammy: a strike by its machinists that has been costing the company a hefty $100 million per day, and concerns from rating agencies that the strike could lead to a downgrade of Boeing’s credit rating. S&P Global Ratings, however, sees the offering as a positive for credit quality, as it will be factored into their assessment of the rating, especially considering the ongoing negative free cash flow.
The strike has forced Boeing to halt production of several aircraft models, including the 737 MAX. This adds to the pressure the company is already facing from regulators regarding a mid-air panel blowout incident that occurred in January.
The combination of labor troubles, production problems, and the ongoing cash burn has significantly impacted Boeing’s financial performance. The company reported a loss of $10.44 per share last week and has acknowledged that cash burn will continue in 2025. Despite these challenges, Boeing CEO Kelly Ortberg remains optimistic, stating, “It will take time to return Boeing to its former legacy, but with the right focus and culture, we can be an iconic company and aerospace leader once again.”
The proceeds from the offering will be used for general corporate purposes, which could include debt repayment. Investors will be closely watching to see how this substantial capital injection will impact Boeing’s recovery and future performance. At the time of publication, Boeing shares were down 1.23% at $153.09.
