California EV startup Fisker’s stock is trending higher last Friday, even though it disclosed its plans in order to raise funds by offering $170 million in convertible notes. As per the report, Fisker recently revealed its intention in a press release. This is in regard to offering $170 million in senior convertible notes to its respective existing institutional investors.
While these convertible notes are due in 2025. This gains approximately $150 million in cash for the company. With the motive of attracting investments, it sells the notes at a 12% discount. However, the yearly payout is less than 6%, while holding the note may not prove to be great as compared to converting to stock. As per the SEC filing, the start conversion price is $7.60, which precisely makes more sense. But that’s in the event that Fisker’s stock hits the market.
According to the company it’s raising funds to “accelerate deliveries, expand growth, and expedite the company’s vehicle programs.” Notably, it has been reported that Fisker’s stock was shockingly on the rise in last Friday morning’s trading session after the news. On the other hand, the automaker shares are still down which is by around 16% over the period of the past 12 months, settling at about $6.40 respectively.
Fisker’s plans to raise funds may impact Fisker’s stocks
Usually, it is noticeable when a company issues convertible notes, its stock tends to fall. The reason is that investors have a fear of dilution. Whereas. the more shares being offered, the less each shareholder owns the company.
In addition to this, Fisker carried out a special meeting on August 30, 2023. This is where stockholders acknowledged the potential issuance of up to 19.99% of outstanding shares or you can say potential dilution. Except the company gets an extra shareholder approval. Also, a maximum of 42,125,083 million shares of Fisker will be issuable upon conversion.
In case investors intend to hold, Fisker will have to pay them back. The announcement comes into effect after Fisker revealed separate plans. This is in order to raise funds in July with a convertible note offering of $340 million respectively.
