Please ensure Javascript is enabled for purposes of website accessibility

Why Boeing Stock Slumped Today

By Timothy Green – May 1, 2020 at 4:25PM

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

The company shut the door on government aid.

What happened

Shares of Boeing (BA -0.39%) were down Friday after the troubled airplane manufacturer said that it did not plan to seek additional funding through the capital markets or the U.S. government following a $25 billion bond offering expected to close on May 4. The stock was down 5.5% at market close.

So what

In a filing with the Securities and Exchange Commission, Boeing laid out the details of its massive bond offering. Senior notes with 7 different maturities will be sold, ranging from 2023 to 2060. The notes maturing in 2023 will carry a coupon rate of 4.508%, while the notes maturing in 2060 come with a coupon rate of 5.93%.

An airplane.

Image source: Getty Images.

In total, Boeing will raise $25 billion through this offering. The company said in a statement on Thursday that demand for the offering had been robust. Due to the strong response, Boeing does not plan to raise any additional capital or seek government assistance once the transaction closes.

Now what

Boeing is facing multiple crises at once. The 737 Max remains grounded following two fatal crashes, and the timeline for its return is in flux. On top of that, airlines and the travel industry as a whole are in turmoil as the coronavirus pandemic ravages demand. It may take years for air travel to fully bounce back, which could mean a prolonged period of depressed demand for commercial airplanes.

Boeing reported free cash flow of negative $4.7 billion in the first quarter alone. The company is cutting production of some planes and plans on reducing its workforce by around 10%, moves that will help get its cash burn under control.

With this $25 billion debt offering, Boeing believes it will have enough cash on hand to survive without a government bailout. Investors didn't seem thrilled with the decision to forgo government aid, sending the stock lower on Friday.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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

Boeing Stock Quote
$131.60 (-0.39%) $0.51

*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 10/06/2022.

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.