What happened
Shares of solar power stock Array Technologies (ARRY 10.53%) continued to tumble Tuesday, extending their slide of the past couple of weeks. As of 11:48 a.m. ET, shares were down 14.9% for the session.
After the market closed Monday, Array Technologies announced that it plans to raise capital to help finance an acquisition. That plan -- to the chagrin of investors -- may result in more shareholder dilution.
Image source: Getty Images.
So what
Array Technologies announced several weeks ago its plan to acquire STI Norland, a European manufacturer of solar trackers, but on Monday, it provided more insight into how it plans to finance the transaction, valued at 570 million euros. The company will issue $325 million in senior convertible notes that are due in 2028. The initial purchasers of those notes will have the option to purchase an additional $48.75 million worth of them.
STI Norland is described as a leading solar tracker provider in Spain and Latin America. In 2020, the company generated revenue of 200 million euros and earnings before interest, taxes, depreciation, and amortization (EBITDA) of 43 million euros. The transaction is expected to close in the first quarter of 2022. After it's completed, Array forecasts it will book adjusted EBITDA of more than $200 million in 2022. For context, Array generated adjusted EBITDA of approximately $50.2 million through the first three quarters of 2021.
Now what
While shareholders may be unhappy with the prospect of dilution, Array's announcement that it will raise capital by issuing convertible notes is unsurprising. Oftentimes, growth companies such as Array don't have enough cash on hand to fund their growth plans, so they need to turn to the debt and equity markets. Indeed, prospective shareholders should expect this company to make similar moves in the future as it pursues other growth opportunities.
