Boeing has recently faced severe challenges due to production problems and labor strikes. In order to ease the financial pressure, it announced that it would raise at least $21 billion through the stock market. The US aircraft manufacturing giant plans to replenish its capital pool by issuing new shares and depositary receipts to ensure that the company has sufficient liquidity to cope with future operational needs in the current market environment.

Capital increase plan: Details of Boeing's capital raising

Boeing announced on Monday that it plans to issue 90 million new shares and $5 billion in depositary receipts. Based on the stock price at the time, the move is expected to bring the company about $19 billion in funds. However, the company's management pointed out that if the market demand is strong, an additional 13.5 million new shares and $750 million in additional depositary receipts can be issued, and the final amount of funds raised is expected to reach $21 billion, or even more than $24 billion.

On Tuesday, Boeing announced that the stock offering price for this capital increase was set at $143 per share, a discount to Monday's closing price of $150.69. Through this stock offering, Boeing expects to raise about $15.8 billion, and with the proceeds from the depositary receipts, the final fund size is expected to reach $21 billion.

At the same time, Boeing also provided investors with an additional 30-day subscription period, allowing them to subscribe for an additional 16.87 million shares and $750 million in depositary receipts, which means that Boeing may eventually raise even close to $24 billion.

Boeing's funding needs: restructuring debt and restoring the balance sheet

Behind Boeing's fundraising this time is its huge financial pressure. Since 2023, Boeing's stock price has fallen by 40.75%, and it faces huge debt and cash flow pressure. The company plans to use the funds raised to repay part of its upcoming debts. According to analysts, Boeing needs to repay $4.3 billion in debt in 2025 and nearly $8 billion in debt in the first half of 2026.

In addition to debt issues, Boeing also announced plans to acquire its main supplier Spirit Aerosystems for $4.7 billion. The transaction is expected to be completed in mid-2025, which is also an important part of the company's cash needs. In order to ensure future liquidity, Boeing has also recently obtained a $10 billion credit line.

A Boeing spokesperson said the fundraising plan was a "prudent move" to restore the company's balance sheet and liquidity, and was in line with the company's needs to cope with the current complex market environment. Boeing added that despite the current multiple challenges, global demand for Boeing products remains strong, which also reflects the market's confidence in Boeing's long-term recovery prospects.

The impact of production problems and labor strikes on Boeing

Boeing's financial pressure is not only due to debt, but also the direct impact of production quality problems and labor strikes. Since September 2024, Boeing has faced a large-scale strike at its production base in the northwest of the United States, with more than 33,000 workers stopping work due to failure to reach a new four-year contract with the company. This social movement has led to the shutdown of Boeing's two major factories, which has significantly reduced the company's cash flow.

Production problems have also had a lasting impact on Boeing's road to recovery. Earlier this year, a Boeing flight accident exposed quality problems in its production process, leading to the Federal Aviation Administration (FAA) to strengthen its supervision of Boeing. Regulators required Boeing to take a series of measures to improve production quality and compliance, which further slowed down the assembly line and affected aircraft deliveries.

Due to delivery delays, Boeing was unable to collect about 60% of the delivery payments on time. As a result, the company posted its largest quarterly loss in four years in the third quarter of 2024, with a loss of up to $6 billion.

The significance of the fund raising for Boeing's future

Through this fund raising, Boeing not only hopes to alleviate the current cash flow difficulties, but also plans to use the funds for general corporate operating expenses and the implementation of future development strategies. Boeing has made it clear that it will use the funds to restore the health of its balance sheet and provide protection for debts that are about to mature.

The capital increase is also aimed at avoiding the company's rating from being downgraded to speculative grade, which has an important impact on the company's financing ability and costs. If Boeing cannot effectively deal with the current financial and operational challenges, its long-term credit rating may face the risk of downgrade.

Boeing's road to recovery is still full of challenges

Although Boeing has won itself some breathing space through this fund raising plan, the long-term challenges it faces still exist. The impact of production problems and worker strikes has not been completely eliminated, and debt pressure and industry competition also pose a threat to the company's recovery prospects.

However, the global market demand for Boeing's products remains strong, especially as air transportation gradually recovers from the impact of the epidemic, which provides hope for Boeing's long-term recovery. Through this fundraising, Boeing not only aims to solve short-term financial problems, but also hopes to pave the way for continued growth in the future. Ultimately, whether Boeing can successfully survive this crisis still needs time to verify.