By Dhirendra Tripathi
Investing.com – Virgin Galactic stock (NYSE:SPCE) edged 1.5% higher in Friday’s premarket following the company’s pricing of a convertible debt issue that sent its stock tumbling on Thursday.
The shares had lost almost a fifth of their value Thursday to a hit a two-year low on worries the convertible debt will dilute existing shareholders upon conversion and reduce earnings per share.
Debtors usually convert their debt into equity when the prevailing market price is above the conversion price. The space travel firm has set the conversion price of the debt at $12.79 per share, implying an appreciation of 27% from the stock’s Thursday close of $10.03.
The company, which is yet to make its first profit, said Thursday it will raise $425 million through a convertible note due 2027 and take on another $75 million of debt under certain conditions. Interest at a rate of 2.5% per annum will be payable semi-annually in arrears on February 1 and August 1 of each year, beginning August 1, 2022.