Source: Wall Street See
Author: Bu Shuqing

To address the liquidity crisis and avoid being downgraded to junk status, boeing has launched one of the largest stock sale plans in global publicly traded company history.

Boeing announced on Monday that it will issue 90 million shares of common stock and approximately $5 billion worth of depositary shares.

Based on last Friday's closing price of $155.01, these common shares are valued at nearly $14 billion. With the depositary shares, the total amount of this sale will reach $19 billion. According to data compiled by Bloomberg, this will be the largest stock sale operation since SoftBank's reduction of T-Mobile US shares in 2020 (raising $20.12 billion).

According to Bloomberg's calculation, if the over-allotment is exercised, Boeing's total fundraising this time could increase to approximately $21.8 billion. Underwriters may choose to sell an additional 13.5 million common shares and depositary shares worth $0.75 billion.

After the announcement, Boeing's pre-market trading of its US stocks briefly rose, but by the time of writing this report, it had given back all gains and fallen by almost 2%. Due to frequent safety issues, prolonged massive strikes by workers, and staggering losses so far this year, Boeing's stock price has plummeted nearly 40% since the beginning of this year.

Top priority - solving the liquidity crisis.

It is widely believed that solving the liquidity crisis is the top priority for Boeing.

The strike has now entered its seventh week, leading to a standstill in the production of Boeing's flagship product, the 737 Max jetliner. Boeing needs to provide funding to accelerate its production after the strike ends. The aircraft manufacturing giant expects that as its aircraft factories restart, including the assembly line for the 737 Max jetliner, it will continue to burn cash in the first half of next year.

Boeing also needs to inject funds to maintain its investment-grade rating. The three major international rating agencies - S&P, Moody's, and Fitch - have all warned that if Boeing continues to engage in new debt financing without being able to repay the approximately $11 billion debt due on February 1, 2026, its credit rating will be downgraded to junk status.

In addition, Boeing factory workers last week voted to reject the company's latest proposal, including a 35% wage increase over four years. CEO Kelly Ortberg stated in a memo to employees on October 11 that Boeing plans to lay off about 10% of its workforce.

Boeing expects to use approximately $4 billion in cash in the fourth quarter, which will result in a full-year free cash outflow of $14 billion.

On October 23, Boeing received approval from the U.S. Securities and Exchange Commission (SEC) to sell up to $25 billion in stocks and debt. Boeing also signed a new $10 billion credit agreement to "obtain more short-term liquidity in a difficult environment."

Ortberg is also considering streamlining Boeing's extensive investment portfolio. He has initiated an evaluation of Boeing's business, which is expected to be completed by the end of the year. According to a previous article by Wall Street Teaches, Boeing is considering selling its prominent NASA business, including the Starliner spacecraft and operations supporting the International Space Station.

In terms of details of this round of issuance, Boeing stated in a declaration that PJT Partners will serve as financial advisor. Goldman Sachs, Bank of America, Citigroup, and JPMorgan will act as joint bookrunners. Wells Fargo & Co., BNP Paribas, Deutsche Bank, Mizuho, Morgan Stanley, Royal Bank of Canada, and Sumitomo Mitsui Banking Corporation will serve as joint bookrunners in the capital markets.

Editor/Jeffy