Why Wayfair's Stock Closed 10.4% Lower Today

Market makers didn't like the e-commerce specialist's plan to raise $750 million of cash in a new debt offering.

Anders Bylund
Anders Bylund
Aug 14, 2019 at 7:59PM
Consumer Goods

What happened

Shares of Wayfair (NYSE:W) closed 10.4% lower on Wednesday. The home goods e-commerce company's stock trended lower all day long to close at the day's lowest price, following the announcement of a plan to raise $750 million in convertible debt papers.

So what

Wayfair expects to offer the new convertible notes on Aug. 15, tied to a seven-year term that expires in August 2026. The initial buyers will have an option to purchase an additional $112.5 million of convertible notes, if desired. Interest rates and other terms will be announced at the time of pricing the securities.

A dollar bill folded into a charting arrow pointing downward, origami-style.

Image source: Getty Images.


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Now what

This offering should roughly double Wayfair's long-term debt obligations, which stood at $761 million at the end of June. Management intends to manage the dilutive effects of these convertible notes with the help of capped call transactions. The last two rounds of debt financing were first used to refinance or service older debts, with the remainder used for general corporate purposes. None of Wayfair's debts are close to expiring, and the sole purpose of this offering is to add more working cash to Wayfair's operating coffers. For the record, the market reaction on Wednesday reduced Wayfair's market cap value by $1.2 billion.