Cash-strapped Boeing can’t afford a credit downgrade to junk as over 32,000 factory workers continue their crippling strike. The company is responding with a long-anticipated share sale, one of the largest ever by a public company, that could raise up to $19 billion for the troubled aerospace giant.
The offering will include 90 million common shares and roughly $5 billion worth of depositary shares, which yield dividend payments until they are converted into common stock by October 2027, according to a statement from the company Monday.
Last week, Boeing received approval from the Securities and Exchange Commission to raise up to $25 billion in shares or debt over the next three years. The company also announced it had entered into a new $10 billion credit agreement with a consortium of major U.S. banks.
Analysts previously projected that the company would need to raise $10–$15 billion to avoid a downgrade, which would substantially raise borrowing costs at a time when Boeing is desperate for cash. That was before last week’s earnings call, when the company revealed it’s on pace to burn $14 billion in cash this year and expects negative free cash flow through the first half of 2025.
New CEO Kelly Ortberg has warned investors a turnaround will take time. The strike, now in its seventh week, has ground production of Boeing’s main commercial offering, the 737 Max, to a halt. Ortberg said getting up and running again will likely be a bumpy process when the striking machinists finally return.
“Kelly dispelled prior elusive free cash flow targets in favor of focusing on how Boeing can return to its former glory,” Bank of America senior analyst Ronald Epstein said in a recent note. “Key to this return will be shoring up the balance sheet.”
The new offering, however, is another blow to the company’s long-suffering shareholders, who will see the value of their holdings diluted. Shares dropped just over 1.5% on Monday morning, trading above the $152 mark. They are down nearly 40% for the year, which began with a panel of a 737 Max famously blowing off during an Alaska Airlines flight in January.
To right the ship, Ortberg said the company is also looking at divesting from non-core assets. On Friday, the Wall Street Journal reported Boeing has explored selling parts of its struggling space business to Jeff Bezos’s Blue Origin.
“We've called for a ‘kitchen sink’ moment at Boeing where the portfolio is fully reviewed, each aspect justified, and necessary actions taken,” Epstein said in his note. “If Kelly can achieve the vision laid out on the call, it would appear the moment is here.”
The company also must return to the negotiating table. Many analysts expressed optimism that striking workers would approve Boeing's latest contract proposal, which included a 35% pay hike, but 64% of union members voted the deal down last week.
