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Boeing shareholders are facing the consequences of the company’s questionable decisions over the years. The aircraft manufacturer, once a symbol of American capitalism, prioritized share buybacks and financial engineering over operational excellence. Now, Boeing finds itself in a difficult position, needing to raise as much as $21bn in equity to survive due to reduced plane deliveries causing negative cash flow.
The equity offering includes common equity and preferred stock convertible into common shares. The pricing details will be disclosed after the financings close. Based on the current Boeing stock price, participants in the capital raising will own around a fifth of Boeing’s outstanding shares. The funds raised will be used to pay off debts and cover cash burn for another year while maintaining Boeing’s credit rating.
A quarter of the equity offering will come from mandatory convertible preferred stock. This preferred stock accrues a dividend and will convert into equity in October 2027 based on the company’s stock performance. The mandatory convertible is often used to attract investors to common equity offerings, as rating agencies treat it as 100% equity.
Although Boeing’s share price has recovered from previous lows, the company still struggles with delivering orders on time and within budget, affecting shareholder returns. This equity offering may be Boeing’s last resort, depending on its ability to improve operational performance with the financial lifeline it has received.