Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Infinera Plunged Today

By Timothy Green - Mar 4, 2020 at 11:15AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A new convertible debt offering was not received well by the stock market.

What happened

Shares of Infinera Corp. (INFN 0.00%) were down on Wednesday after the networking hardware and software provider announced plans to sell $200 million of convertible senior notes. The stock was down 14.5% at 11:30 a.m. EST.

So what

Infinera plans to offer $200 million of convertible senior notes due 2027 in a private placement. The initial purchaser will also be granted a 13-day option to buy up to $30 million worth of additional notes.

A stock chart with a declining arrow.

Image source: Getty Images.

Infinera plans to use the proceeds from the offering for general corporate purposes. This includes working capital to fund growth and new strategic projects.

Now what

This move comes a little more than a week after Infinera reported its fourth-quarter results. The company beat analyst expectations across the board, with revenue growing by 15% year over year and a return to profitability on an adjusted operating basis. The company is nowhere close to profitable under generally accepted accounting principles (GAAP).

At the end of 2019, Infinera had $109 million of unrestricted cash and total debt of $355 million. Cash flow from operations was negative throughout 2019, leading to a shrinking cash balance and a growing debt load. The offering will give the company more resources to pursue growth, but investors don't seem thrilled by the additional debt.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Infinera Corporation Stock Quote
Infinera Corporation
$5.30 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.