Investors think that Boeing BA 1.67% will almost certainly sell some of its shares. They don’t know when, how much, or what price a sale is.
You can, however, come up with useful ranges for those factors. A capital raise should be good for Boeing’s stock if it can hit its goals.
Reuters reported on Wednesday that Boeing was almost ready to issue $15 billion in stock and hybrid debt securities. The company needs the money to fix its balance sheet, which had more than $50 billion in long-term debt at the end of the second quarter.
Wall Street investors who looked at the balance sheets of similar companies and Airbus AIR 3.44% said that was at least $20 billion too much.
Boeing wouldn’t say anything about its plans to raise money.
Wall Street, on the other hand, has some ideas. Some analysts who were asked agree that there should be a $10 billion to $15 billion sale of shares in early November, ideally after the labour strike is over.
More than 33,000 workers in the Pacific Northwest quit on September 13 when their old contract ran out.
The best case situation is issuing shares after the strike ends. Before the strike, a share of Boeing stock was worth just under $163. It ended the day just below $155 on Wednesday. It’s always a good idea to charge more for stock. Existing buyers would rather not have to buy as many shares in order to get the same amount of money.
It’s also best to end the strike as soon as possible. Making planes is one of the fastest ways for Boeing to fix its finances. Planes bring in cash. Wall Street thought that about 700 planes would be delivered at the beginning of 2024, which would bring in $5.4 billion in free cash flow. Analysts now think that 430 planes will be built and that close to $10 billion will be spent.
Boeing may not be able to wait for the best. Keeping an investment grade credit rating is still important to management, which is a big reason to sell stock. Rating agencies probably want a capital rise soon, no matter what the strike situation is.
The union and the company both seem to be stuck on defined benefit plans. The group wants pensions with clear benefits. 401(k) fixed contribution plans are what the company likes best. It’s possible that the union will get pay raises and other deals. Wall Street doesn’t think Boeing’s management will give in on pensions.
If you buy shares in the company before or after the third-quarter earnings report and before or after the strike ends, the offering will likely be less expensive than where the shares are going at the moment. A lot of money needs to be put into stock very quickly. It’s fine to offer a price of about 5%.
So any efforts to raise around $10 billion in capital over the next month at a price that isn’t too high compared to how the stock is moving now are likely to be good for shares. More stock being given means less value for shareholders, but Boeing shareholders are well aware of what’s going on.
Investors also want to see big changes in areas they think will benefit the business in the long run, such as better ties with workers, higher production rates, better quality, and less debt.
Boeing stock was down about 41% year-to-date and about 38% since an emergency door plug broke on a 737 MAX 9 plane on January 5 while it was in the air. Because of that incident, work was slowed down and there was more oversight. It was also the start of another tough year for the company. Boeing hasn’t had a profit for the whole year since 2018.
In that year, it shipped more than 800 planes, made about $16 per share, and had free cash flow of more than $15 billion.
