Boeing Weighs $10 Billion Stock Sale Amid Costly Strike

Call it an evasive maneuver.

As 33,000 industrial workers at its Puget Sound industrial hub embark on a shocking strike and its debt load teeters on junk territory, the beleaguered Boeing is considering an emergency move: selling $10 billion in new stock to score some quick cash, sources told Bloomberg on Tuesday. As per usual for Boeing, it may be the smallest headache the plane-maker faces all week.

Short Runway

Just when you think Boeing’s hit a new low, there’s a newer, lower low. Last week, the Federal Aviation Administration released a damning special report following a six-week audit that confirmed everybody’s worst fears: Boeing workers received little training, were pressured to prioritize production speed over quality and safety, and were ill-equipped to build and inspect the planes. Trigger warning for all you borderline aerophobes out there: In one hair-raising example, a Boeing mechanic was found to be relying on an improvised tool to measure the gaps between certain plane parts. Boeing’s not getting any points from us for innovative hacks.

Still, it gets worse — much worse. On Friday, the National Transportation Safety Board issued an urgent safety recommendation, flagging a potentially faulty rudder control component on some Boeing 737 models; on Tuesday, the chair of NTSB sent a letter to the FAA saying the agency’s oversight and response to identified safety lapses were dangerously lax. Oh, and did we mention that a 737-8 Max plane flown by Ryanair skirted disaster when four rear landing gear tires blew out upon landing at Milan Bergamo Airport in Italy on Tuesday? Thankfully, no one was hurt.

Meanwhile, the ongoing strike in the Pacific Northwest is exacting a heavy financial toll:

• According to estimates by JPMorgan Chase, the strike will likely cost Boeing $1.5 billion for every month employees stay on the picket line. On Friday, the union refused to accept what the company called its “best and final offer,” stretching the strike to its third week. A key sticking point has been the reinstatement of a defined pension plan, which was replaced by 401(k)s in 2014.
• The work stoppage only adds to the company’s ongoing cash crunch, and risks sending its $58 billion debt load into junk territory. Fitch Ratings has warned that the strike could have a “meaningful operational and financial impact, increasing the risk of a downgrade.”

Stockbuster: Still, Boeing executives are waiting for a more precise picture of the strike’s impact before initiating any stock sale, sources told Bloomberg — and they may decide against the move entirely. Any stock sale could hurt the company’s share price, already down around 38% year-to-date. However, there may be no alternative if Boeing wants to maintain its investment grade rating, and ​​Vertical Research Partners analyst Rob Stallard told Bloomberg the equity raise could reach as high as $15 billion, a nice financial cruising altitude for now.