Shares of Energy Fuels (UUUU 2.37%), a miner of uranium for use as atomic fuel in nuclear power plants, bounced back from their Friday slump on Monday, gaining 2.3% -- then soared 7.8% more through 10:30 a.m. ET Tuesday.
It seems investors have gotten over their shock at Energy Fuels' Friday money grab.
Image source: Getty Images.
Energy Fuels raises cash
Energy Fuels announced Friday it placed with private investors $700 million worth of convertible notes (that's debt that can be converted into shares, diluting existing shareholders).
Energy Fuels got a great rate on the debt -- just 0.75% interest -- and a decent duration as well. The debt doesn't come due until November 2031. Despite the favorable (to Energy Fuels) terms, demand for the debt was strong, and underwriters elected to expand the offering from its original size, ultimately placing all $700 million with bond investors.
If Energy Fuels decides to convert its debt into shares rather than repay it, the investors will be allowed to trade each $20.34 worth of debt they hold for one share of Energy Fuels stock. However, Energy Fuels noted it bought capped calls for $53.55 million, which effectively raise the conversion rate to $30.70.
Is this good news for Energy Fuels, or bad?
Investors Friday may have been spooked by the possibility of share dilution, but those fears seem to have since subsided. In their place is the understanding that Energy Fuels now has more than $645 million in cash at its disposal, with which to grow its twin businesses of mining uranium and rare earth metals.
Even burning nearly $115 million annually, that gives Energy Fuels almost six years to find its footing now. If the U.S. nuclear industry grows as fast as it's expected to, that might be just long enough.
