Boeing on Tuesday announced it will raise about $21 billion in capital through public stock offerings and depositary shares, outpacing the $19 billion it initially planned to raise with its Monday announcement. Boeing stock reversed higher Tuesday.
The Dow Jones aerospace manufacturer is in a rush to raise cash as experts estimate the company is burning through $1 billion per month as its worker strike drags on. Boeing on Tuesday hiked its offering to 112.5 million shares of common stock, up from 90 million it announced Monday, as well as $5 billion worth of depositary shares. Boeing priced its stock offering at $143 per share to raise $15.81 billion. The depositary share offering raised $4.9 billion.
The company intends to use the funds to cover general corporate purposes, repay debt, increase working capital and expenditures, as well as fund and invest in Boeing's subsidiaries. Boeing currently has $57.65 billion in outstanding debt, FactSet data shows. The manufacturer last week reported a nearly $6.2 billion net loss for its Q3 results.
Boeing reported $10.5 billion in cash and marketable securities at the end of the September quarter. That was down from $12.6 billion at the end of Q2.
In an effort to streamline the company, Boeing is exploring the sale of its space business, the Wall Street Journal reported on Oct. 25. Boeing and partner Lockheed Martin were already seeking a buyer for their 50-50 rocket-launch venture, the United Launch Alliance, over the past year. Boeing let go of Ted Colbert, the head of its defense and space division in September.
"We're better off doing less and doing it better than doing more and not doing it well," CEO Kelly Ortberg said on a mid-October analyst call.
S&P Global in early October warned it would downgrade Boeing's rating if its cash balance fell below $10 billion or if it is unable to increase its financial leverage.
Boeing Strike Continues
Meanwhile, Boeing's worker strike continues after union members last week rejected an offer that would have hiked pay by 35% over four years, up from its previous offer for a 25% raise.
However, the negotiations have made some progress. A little less than two-thirds of voting workers rejected the latest offer. For the prior proposal, 95% of the workers rejected the deal at the recommendation of union leaders.
Reports indicate the union has been seeking a 40% raise as well as additional changes and benefits. Reinstating the pension plan is among worker priorities. But experts say that's a deal-breaker for Boeing.
The company ditched its traditional pension a decade ago, which was a defined-benefits plan where the employer primarily bore the pension liability, Reuters reported. However, an alternative defined-contribution plan, such as a 401(k) plan, is more likely to pass without hampering Boeing's financials further.
Defined-benefit plans guarantee predetermined monthly payouts to retired employees, based on wages and years of service. Contribution plans have emerged as the more popular model, where payouts are determined by employee investments over time.
Boeing removed its pension plan in 2014 as part of a deal with union machinists to build its 777X jetliner in Washington. The company called its long-term pension liability growth "unsustainable" at the time. The manufacturer in early September said it was not considering a restart of the pension plan.
Boeing Stock
Boeing stock rose 1.5% Tuesday, reversing after a modest drop in early trade.
Shares have unraveled 41% this year amid quality control concerns following in-flight malfunctions and a string of delivery delays, which are now hampered by the strike.
Boeing stock is just behind Intel among this year's worst performing Dow Jones Industrial Average names.
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