United issues 39M+ shares of equity to finance operations

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How about this… A publicly traded company raises its own money. Let’s give United a round of applause for heading on over to the good people of Barclays and Morgan Stanley and asking them to underwrite some more stock. I’ve been pretty hard on the airlines seeking bailout money, swaps, grants, and whatever free taxpayer money they could get their hands on, but this is what should be happening. Sure, shareholders will get diluted, and the underwriters will the have the ability to purchase almost 4M additional shares which would dilute even more, but companies should seek to finance their own way out of this trough, especially after using cheap money to finance buybacks over the years.  Maybe this means they can ride out the storm…It was heavily Intimated that come September they would be laying off employees once Uncle Sam’s money ran dry. You can read more here – now let’s just hope that the bulk of these shares don’t fold into restricted stock awards to the C Suite Execs.

Via PRNEWSWIRE:

CHICAGOApril 21, 2020 /PRNewswire/ — United Airlines Holdings, Inc. (NASDAQ:UAL) today announced an underwritten public offering of 39,250,000 shares of its common stock, subject to market conditions and other factors. Morgan Stanley and Barclays are acting as the underwriters of the offering. The Company has also granted to the underwriters a 30-day option to purchase up to 3,925,000 additional shares. The proceeds from the offering will be used for general corporate purposes.

Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

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3 Comments

  • Luke Vader April 21, 2020

    At today’s closing stock price of $27.88, that would mean UAL raised about $1 billion of equity/capital. Wonder how far that will take them.

  • Rob April 21, 2020

    The problem with not supporting vulnerable, yet strategic industries (airlines, banks etc.) in calamities like this is that we basically paint a target on their backs and virtually guarantee that every crisis in the future will bankrupt them. If investors know that no support package will even be considered, and that the companies will be forced to massively dilute shareholders by issuing emergency equity capital at the bottom, the vultures will short the stocks mercilessly at the first whiff of any potential problem and make the emergency capital raise happen as a self-fulfilling prophecy.

  • Glenn April 21, 2020

    This is a good message to all the naïve bloggers who wondered why airlines didn’t have a pile of cash saved up for an emergency. They bought back their stock to (theoretically) build up the firms equity which they can then dilute in an emergency to raise operating funds. Not sure why this is so hard for other bloggers (I am one) to understand.

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