Shares of United Airlines Holdings (NASDAQ:UAL) traded down more than 5% on Thursday after the airline said its board has authorized it to sell more shares. It's not yet clear whether the sales will be sold, but on a down day for markets investors didn't need much of an excuse to sell.
In a regulatory filing, United said its board has authorized it to issue up to 37 million shares "at the market." An at-the-market offering gives United and the banks it is working with a lot more flexibility over how many shares are sold and at what price, as opposed to a formalized secondary offering in which the company would sell a predetermined number of shares at a fixed price.
The airline noted the offering is subject to a number of terms, and said "there is no assurance that [United] will proceed with any such offering." United currently has about 311.8 million shares outstanding.
Investors tend to dislike stock sales, at least in the near term, because by adding shares a company makes each slice of the pie a little smaller, meaning each share owned should be worth a little less.
But given what United and other airlines have been through over the past year due to the pandemic, it's hard to fault the company for taking steps to maximize its flexibility. United's share price is still down over the past year, but its enterprise value, a measure of total market capitalization plus debt, is actually up 13%. With that in mind, it isn't such a bad time to sell stock if you are in need of the cash.
The airlines are healing, but a full recovery is likely to take years. We're still at a point in this recovery where it pays to have options. United's board is acting as it should by authorizing those shares.