Shares of China's digital entertainment website operator Bilibili (NASDAQ:BILI) are lower by 14.9% as of 12:01 p.m. ET on Thursday after the company announced it intends to raise funds by issuing new convertible debt.
For the second day in a row, Bilibili shares are being battered. The stock tumbled 9% on Wednesday after the company reported mixed third-quarter numbers and disappointing revenue guidance for the quarter currently underway. Today's more dramatic plunge stems from news that the company plans on issuing $1.4 billion worth of notes, or debt, that can be converted into shares of the company.
For perspective, Bilibili's current market cap stands at $26.7 billion, and the company's current balance sheet indicates it's already servicing a little over $1.2 billion worth of long-term debt. It did $808 million in business last quarter, and $2.1 billion through the first three fiscal quarters of the year.
The decision to raise funds by issuing convertible debt is obviously less than ideal for existing shareholders. The timing of the news, however, may have more to do with Thursday's sharp sell-off than the news itself. Investors were already jarred by yesterday's troubled earnings report, leaving the stock excessively vulnerable to any prospectively problematic news today.
The two-day rout, however, ultimately benefits would-be buyers who have been waiting for an opportune time to step in. This is it.
Sure, China has been cracking down on most of its consumer-facing tech companies this year, knocking more than 40% off of Bilibili's peak value hit back in February before Wednesday's quarterly earnings report. There's little left that the country's regulators could do to further upend this company's business, though, making the halving since February's high a good entry opportunity.