Final hours! Save up to 55% OFF InvestingProCLAIM SALE

Virgin Galactic Tanks on Fear Convertible Debt Will Dilute Equity

Published 01/14/2022, 12:42 AM
© Reuters
SPCE
-

By Dhirendra Tripathi

Investing.com – Virgin Galactic stock (NYSE:SPCE) plunged 16% Thursday on concerns about possible equity dilution connected to the $500 million of convertible debt the company is raising.

Debtors usually convert their debt into equity when the prevailing market price is above the conversion price.

The company said it will raise $425 million through a convertible note due 2027, and may take on another $75 million of debt under certain conditions.

The interest on the debt will be payable semi-annually on Feb. 1 and Aug. 1 of each year, beginning this August.

The space company said it will use the capital to “fund working capital, general and administrative matters and capital expenditures to accelerate the development of its spacecraft fleet in order to facilitate high-volume commercial service.”

The stock slid even as the company attempted to cushion the impact of any dilution by entering into a deal for capped call transactions. The company said it may use part of the proceeds to fund that purpose.

Capped call transactions will come to offset any potential payment the company may have to make in excess of the principal of converted notes.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.