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United Airlines Seeks To Raise $1B With Massive Share Sale

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April 22, 2020

United Airlines (UAL) has announced an underwritten public offering of 39.25 million shares of its common stock in a bid to raise around $1 billion,as it seeks to further boost liquidity in these challenging times. The offering will be priced at $26.50 per share.

The company has also granted to the underwriters a 30-day option to purchase up to 3,925,000 additional shares. According to the statement, the proceeds from the offering will be used for general corporate purposes. Subject to the satisfaction of customary conditions, the offering is expected to close on April 24, 2020.

UAL stock, which dropped 1.7% in after-hours trading on Tuesday, is currently trading at $27.88. Share prices have plunged 68% year-to-date due to the fallout from the coronavirus pandemic.

As a result, the average analyst price target of $69 now indicates upside potential of almost 150%. Indeed, TipRanks shows that in the last three months, UAL has received 6 buy ratings vs 8 hold ratings- giving it a Moderate Buy consensus. (See UAL stock analysis on TipRanks).

“We are growing increasingly convinced that industry recovery to 2019 levels of output will be a multiyear affair, resulting in the material shedding of aircraft and head count along the way,” JP Morgan’s Jamie Baker wrote of the airline industry recently. However, he maintained his buy rating on UAL with a price target of $51 (83% upside potential).

With fleets grounded, United Airlines has had to turn to the US government for assistance. For instance, UAL has applied for a $4.5 billion government loan, and on April 15, United Airlines confirmed the airline expects to receive $5 billion through the Payroll Support Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Of the $5 billion, approximately $3.5 billion will be a direct grant and approximately $1.5 billion will be a low interest rate loan. These funds will be used to pay for the salaries and benefits of tens of thousands of United Airlines employees.

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