And now the airline giants appear to be bleeding money. According to economic analysis and modeling firm IMPLAN, as of September 27, the strike by 33,000 workers had reduced U.S. GDP by $1 billion. Boeing Co. on Tuesday called off ongoing negotiations with striking workers, accusing the International Association of Mechanical and Aerospace Workers (IAM) of making unreasonable demands, and halted its previous round of 30% pay raises over four years. The proposal was withdrawn.
As a result, Wells Fargo expects Boeing to sell between $10 billion and $15 billion in new stock to make up for lost profits, according to an Oct. 9 analyst note. Boeing had previously targeted $10 billion in working capital on its balance sheet, but Wells estimates Fargo had reduced cash to about $8 billion at the end of the third quarter.
Boeing declined a request for comment from Fortune on whether the company will sell the new stock.
The memo said the $10 billion cash raise would keep balances above the $10 billion level through 2025, but added that “[Boeing]does not want to enter the stock market twice. “I don’t think so, but there is little room for further challenges.” Still, Wells Fargo analysts say this will leave Boeing with about $30 billion to $40 billion in net debt.
John Morgan, CEO of business consultancy Venture Smarter, told Fortune magazine that “a potential credit rating downgrade by agencies such as S&P, which already monitors Boeing’s debt, may “The financial burden is getting worse.” “Given these factors, the issuance of stock seems like a reasonable step for Boeing to strengthen its finances.The company has sufficient liquidity to deal with ongoing labor disputes and maintain operations. It is necessary to ensure that
When will Boeing issue stock?
Considering it took 10 days for the union and Boeing to get to the negotiating table when negotiations first broke down on September 27, Wells Fargo expects Boeing to release its latest financial results on October 27. He predicts that there may be “another blow to reaching an agreement” by then. twenty three.
“[Boeing]hopes to reach an agreement before raising additional cash through an initial public offering,” according to an analyst note.
Wells Fargo analysts did not respond to Fortune’s request for comment on exactly when the stock offering is expected to occur. But Wells Fargo predicts the strike will likely last through much of October and could cost Boeing an additional $2 billion or so in cash.
In the short term, the capital increase announcement could lead to a decline in the stock price, which was trading at just over $148 as of midday Thursday. Issuing new shares could dilute the value of Boeing’s existing stock, making it less attractive to shareholders, Morgan said.
“Investors often react negatively to dilution, especially if they see it as a sign that the company is in financial trouble,” Morgan said.
Since the start of 2019, Boeing has lost more than $25 billion, burning through $4.3 billion in the second quarter of 2024 alone. Additionally, Boeing confirmed to Fortune that production of the 737 has “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, and E-7 Wedgetail,” a Boeing spokesperson said. told Fortune in a Sept. 25 statement. “Work at our manufacturing sites in Washington and Oregon will also be temporarily suspended. Employees not represented by this union will continue to report to work as normal.”
While Boeing’s current situation may look bleak now, the stock offering could have a “more positive” impact in the long term, Morgan said. This could “stabilize the company’s operations and allow it to continue production and meet its financial obligations.”
But it’s important to remember that Boeing’s current situation hurts more than its bottom line or its own employees. Halting aircraft production and delaying negotiations with striking workers would also put pressure on airlines and suppliers.
James Gellert, executive chairman of financial analysis firm Rapid Ratings, told Fortune magazine: “The Boeing strike is going to hurt far more than the customers because the pain will flow upstream.” Ta. “This pain comes at a frightening time as Boeing’s suppliers will be unwittingly affected by the disruption.”
