Trying to keep its momentum, Ford plans a stock offering
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With Wall Street increasingly confident about Ford Motor Co.’s survival, the company now wants to test investors’ appetite for more stock.
After the market closed today Ford announced plans to sell 300 million new shares. At today’s closing stock price of $6.08 the deal would raise $1.8 billion in cash for Ford.
The company said proceeds from the offering would be used to fund a portion of the payments it owes to the United Auto Workers’ retiree healthcare trust. Ford had been planning to use stock for the payments, but by using cash instead it presumably lessens the UAW’s leverage over the company.
Ford’s shares immediately fell in after-hours trading, although that’s typical on the heels of an offering announcement. The stock was trading at about $5.75 at 2:20 p.m. PDT, after falling 16 cents before the news.
The company has about 2.9 billion shares outstanding, so a 300-million-share offering would dilute current investors’ holdings by about 10%.
Ford’s stock has surged more than 250% over the last two months while the outlooks for rivals Chrysler and General Motors have worsened drastically. Chrysler has filed for bankruptcy protection and GM may have to follow by June 1.
Unlike Chrysler and GM, Ford decided against taking federal loans to shore up its finances. As my colleague Ken Bensinger noted in this post, Ford has managed to succeed where Chrysler and GM have failed -- ‘quietly renegotiating its own union contracts, cutting legacy costs and reducing debt.’
In a statement today pitching the new stock deal, Ford CEO Alan Mulally said the company continues ‘to make strong progress on our transformation plan -- gaining retail market share with great new products, improving quality, reducing costs and positioning Ford for a return to profitability.’
The stock offering, he said, ‘is another example of the fast, decisive action we are taking as we build momentum on our plan, including further progress on improving our balance sheet.’
-- Tom Petruno