The Boeing Company (NYSE:BA) has successfully closed an offering of depositary shares, each representing a 1/20th interest in its 6.00% Series A Mandatory Convertible Preferred Stock, on Thursday. The aerospace giant, headquartered in Arlington, Virginia, entered into an underwriting agreement on Monday with Goldman Sachs & Co. LLC, BofA Securities, Inc., Citigroup Global Markets Inc., and J.P. Morgan Securities LLC.
Initially, Boeing agreed to sell 100 million depositary shares, but following the underwriters' exercise of their over-allotment option, an additional 15 million shares were also sold, bringing the total to 115 million shares. The offering, which was made pursuant to a shelf registration statement filed with the SEC earlier this month, concluded with the issuance of the shares on October 31, 2024.
The filing of a certificate of designations with the Delaware Secretary of State establishes the rights and preferences associated with the preferred stock. This includes a dividend rate of 6.00% per annum and a liquidation preference of $1,000 per share. The dividends are set to be paid quarterly starting January 15, 2025, and ending on October 15, 2027. Unless converted earlier, each share of Preferred Stock will automatically convert into shares of Boeing's common stock on or about October 15, 2027.
The Certificate of Designations also stipulates that while any preferred stock remains outstanding, Boeing will not declare or pay dividends, or repurchase any junior stock, including common stock, unless all accumulated and unpaid dividends on the preferred stock have been fully paid.
Boeing also entered into a deposit agreement with Computershare Inc. and Computershare Trust Company, N.A., which will serve as the depositary. This agreement outlines the issuance of depositary receipts representing the depositary shares.
In other recent news, Boeing and Chinese planemaker COMAC have been making significant moves in their respective markets. Boeing recently completed a significant equity financing operation, raising approximately $21 billion despite concerns of share dilution.
Analyst firms Baird and Bernstein have provided contrasting outlooks, with Baird maintaining an outperform rating and Bernstein downgrading the stock due to ongoing operational challenges and a hazy recovery timeline. In addition, a prolonged strike involving 33,000 machinists has halted component shipments for several Boeing airplane programs, prompting calls for resolution from state officials.
On the other hand, COMAC is expanding its international presence by opening new offices in Hong Kong and Singapore as part of its efforts to penetrate the global passenger jet market. The company also signed a memorandum of understanding with Hong Kong-based aircraft maintenance group HAECO to facilitate joint efforts in providing comprehensive support to COMAC's customers.
Meanwhile, the U.S. labor market appears to have remained relatively stable despite the impact of recent hurricanes and labor disputes. The Labor Department reported a decline in jobless claims and a decrease in the number of people receiving benefits after an initial week of aid. However, the full impact of these disruptions on job growth for October is yet to be fully determined.
InvestingPro Insights
As Boeing navigates its financial strategies with this new offering, InvestingPro data provides additional context to the company's current position. Boeing's market capitalization stands at $111.65 billion, reflecting its significant presence in the aerospace industry. However, the company faces some challenges, as evidenced by its negative P/E ratio of -11.49, indicating recent unprofitability.
InvestingPro Tips highlight that Boeing may have trouble making interest payments on its debt, which could be a factor in the company's decision to issue new securities. Additionally, the tip that Boeing's stock price has fallen significantly over the last three months (with InvestingPro data showing a -19.05% 3-month price return) may have influenced the timing and terms of this offering.
These insights are just a sample of the valuable information available through InvestingPro. Subscribers have access to 11 additional tips for Boeing, offering a more comprehensive view of the company's financial health and market position.
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