BlackSky’s “dangerous” information is definitely excellent news.
Timing, they are saying, is the whole lot.
Ten days in the past, spy satellite tv for pc firm BlackSky Expertise (BKSY -20.29%) rocketed greater on some sort phrases from H.C. Wainwright analyst Scott Buck, who predicted the inventory — price lower than $22 on the time — would hit $28 inside a yr. The prediction turned self-fulfilling as traders glommed onto BlackSky and bid its shares as much as (and as of yesterday, previous) $28.
Then right this moment occurred.
Picture supply: Getty Pictures.
What occurred to BlackSky right this moment?
As we speak, BlackSky inventory is crashing, down 20% via 12:40 p.m. ET, and for one cause: Hoping to money in on its luck, BlackSky introduced yesterday it might subject $125 million price of convertible debt, and probably as a lot as $143.8 million if there was sufficient demand. BlackSky will use $113.3 million of the money raised to roll over outdated debt, and use the remaining for “basic company functions.”
Demand for the debt providing was sturdy, and right this moment BlackSky upped the providing dimension to $160 million, and probably $185 million.
Is BlackSky a promote?
Traders aren’t thrilled with the information, perhaps as a result of BlackSky can be paying 8.25% curiosity on the brand new debt, perhaps as a result of they worry share dilution when the debt converts into inventory. However I feel they might be lacking one thing right here.
First, by my calculations, BlackSky was paying near 11.5% on its outdated debt, so the brand new rate of interest is definitely higher than the outdated. Second, BlackSky’s new debt will not convert to fairness till the share worth rises to just about $37 a share. The inventory would want to climb one other 60% for that to occur, and I think about most traders could be blissful if that occurred.
All issues thought of, right this moment’s sell-off seems like an overreaction. And BlackSky’s information sounds fairly good to me.
Wealthy Smith has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure coverage.
