Wells Fargo expects Boeing to sell up to $15 billion in new stock to cover worker strike losses

Boeing has clearly had a turbulent year. From multiple safety incidents to the Starliner fiasco to bringing in a new CEO amid a massive labor strike, the company has endured blow after blow.

And now, it seems the aviation giant is bleeding money. As of Sept. 27, the fallout from 33,000 workers on strike represented a $1 billion reduction in U.S. GDP, according to economic analysis and modeling firm IMPLAN. On Tuesday, Boeing suspended ongoing negotiations with striking workers, accusing the International Association of Machinists and Aeronautical Workers (IAM) of making unreasonable demands and withdrawing its previous offer of a 30% pay rise over four years .

As a result, Wells Fargo estimates Boeing will sell $10 billion to $15 billion in new stock to make up for the earnings losses, according to an Oct. 9 analyst note. Fargo estimates that cash was down to about $8 billion at the end of the third quarter.

Boeing declined a request for comment from wealth about whether the company would sell new shares.

A $10 billion cash boost keeps balances above the $10 billion mark until 2025, “but leaves some room for other challenges, while we don’t think (Boeing) wants to go twice in the equity markets “, according to the note. However, Wells Fargo analysts say that leaves Boeing with about $30 billion to $40 billion in net debt.

“This financial strain is compounded by the potential for downgrades by agencies such as S&P, which have already placed Boeing’s debt on watch,” said Jon Morgan, CEO of business advisory firm Venture Smarter. wealth. “Given these factors, a stock offering seems like a plausible step for Boeing to shore up its finances. The company must ensure that it has sufficient liquidity to deal with ongoing labor disputes and maintain operations.”

When will Boeing launch a stock offering?

Given that it took 10 days for the union and Boeing to meet at the bargaining table when talks first broke down on Sept. 27, Wells Fargo expects there to be “another chance to get a deal” before Boeing releases its latest earnings in October. 23.

“We believe (Boeing) would like to reach a deal before raising further cash through a stock offering,” according to the analyst’s note.

Wells Fargo analysts did not respond to wealthhis request for comment on when exactly we might expect a stock offering. However, Wells Fargo predicts the strike will likely stretch through most of October, which could hit Boeing for about $2 billion more in cash.

The story continues

In the short term, the announcement of a stock raise could send the stock price down, which was slightly above $148 mid-day Thursday. Issuing new shares could dilute the value of Boeing’s existing shares, Morgan explains, making them less attractive to shareholders.

“Investors often react negatively to dilution, especially if they perceive it as a sign that the company is in financial trouble,” Morgan said.

Since the beginning of 2019, Boeing has lost more than $25 billion and burned $4.3 billion in the second quarter of 2024 alone. In addition, Boeing confirmed that wealth production of 737 aircraft was “completely halted” due to the strike.

“Aircraft production in Washington state is temporarily suspended, including work on the 737 MAX, 767, 777/777X, P-8, KC-46A Tanker, E-7 Wedgetail,” a Boeing spokesman said. wealth in a statement on September 25. “Work at our manufacturing sites in Washington and Oregon will also be temporarily suspended. Employees who are not represented by this union will continue to report to work as normal.”

While Boeing’s current situation may seem bleak at the moment, a stock offering could have a “more positive” long-term impact, Morgan said. It could “help stabilize the company’s operations, allowing it to continue production and meet its financial obligations.”

However, it is important to remember that Boeing’s current situation hurts more than the company’s bottom line and its own workers. Halting aircraft production and delaying negotiations with striking workers is also putting pressure on airlines and suppliers.

“The Boeing strike will hurt far more than its customers because the pain flows upstream,” said James Gellert, executive chairman of financial analyst firm RapidRatings. Wealth. “Boeing’s suppliers will be the unwitting recipients of the work stoppage, and this pain comes at a terrible time.”

This story was originally featured on Fortune.com