Boeing Raises Over 21 Billion Amid Cash Crunch
Aidan Griffin
Staff Writer
Boeing, one of the largest aerospace companies in the world, has recently raised over 21 billion dollars in the biggest share sale of a public company ever!
Boeing discounted their stock price by about 7.7% which encouraged buyers to buy 112.5 million common shares for around $143 each. This is the biggest share sale since the US Treasury sold 20.7 billion of American International Group shares to bail out insurers in the financial crisis of 2012.
Boeings Background and Issues
The reason Boeing needed to raise such a large amount of money is because they have been struggling financially for many years. In 2019, Boeing launched a new 737 Max model aircraft which experienced two fatal crashes and cost the company billions in fines. Additionally, this destroyed their image and revenues for the next couple of years. Boeing is still recovering from the lack of aircraft passengers since Covid-19. These unfortunate disasters have forced Boeing into a critical cash crunch. This huge share sale is aimed to combat their recent loses of revenue.
Additionally, to these disasters, Boeing is experiencing a huge labor strike. Employees of Boeing have demanded better compensation and benefits, costing Boeing billions of dollars in losses due to halted production and higher worker salaries. This has led to heightened cash outflows. With these new labor strikes, Boeing is estimated to burn over 4 billion dollars in cash just for the 4th quarter of 2024. This cash burn will run deep into 2025 due to huge production delays and higher worker compensations.
What Boeing’s Future Will Look Like
While there is a promising future for the aerospace industry, Boeing’s future will hinge on how quickly they can solve their intense labor strike. If they could end this strike in a timely manner, then Boeing could quickly restart their new 787 Dreamliner project. On top of that, Boeing’s 50-billion-dollar outstanding debt poses another risk for shareholders and will require significant improvements in revenue to service it. Boeing is now more at risk of bankruptcy and must generate consistent cash inflows to cover their new debt payments and a new 6% dividend to new stockholders.
While the 21 billion dollar share sale provided the company with large liquidity, Boeing’s total debt still sits at over 50 billion dollars. This new capital will help Boeing pay off their debts and help eliminate debt accumulation. The new funds will be used to jumpstart the production of new airplane models, the 737 MAX and 787 Dreamliner. However, to find a permanent fix Boeing needs to overcome their workers’ strike crisis.
Future Stock Price Outlook
It is difficult to say whether Boeing’s future stock will be bullish or bearish. However, with this new 21 billion share issuance, Boeing can improve the quality of their airplanes and become an industry aerospace leader again. If Boeing manages to resolve their labor and production issues, there is a high chance that the company will improve its profitability and will be considered a good investment opportunity.
Contact Aidan at Aidan.Griffin@student.shu.edu