The stock of solar power technology and energy storage company Enphase Energy (ENPH -5.94%) initially dropped Wednesday before bouncing back as investors digested a capital raise announcement.
Shares were down more than 4% early, before rebounding to a 3.7% gain as of noon EST.
Enphase Energy today announced its intention to issue $1 billion in green convertible senior notes. The company will decide whether to offer the notes based on market conditions, but plans two offerings of $500 million each due in 2026 and 2028. Any conversions of the senior, unsecured notes will be either in cash, common stock, or a combination. The initial reaction to the potential dilution to existing shareholders was negative today. But the fast-growing company could put the capital to good use, likely giving investors a more positive outlook.
The company supplies microinverters for solar panels, which convert power at the panel into AC power used in the home or business, as well as supplying an energy storage system. Enphase's stock has approximately tripled in the last 12 months as its revenue and gross margins have grown sharply.
Even with disruptions from the pandemic, microinverter shipments rose to 6.83 million in 2020, up about 11% versus 2019, but almost 150% more than 2018 shipments. Some of the proceeds raised from the note offering will be used to repurchase 2024 and/or 2025 notes and to finance eligible green expenditures. The remainder will be used for working capital to help fund the company's growth.
Enphase shares have run up much more than even the fast growth of the business. Investors need to be patient while the business grows into the current valuation, and expect volatility in the high-flying stock.