United Airlines Holding Inc. (NASDAQ:UAL) stock dropped 2% in extended trading on Tuesday after the carrier indicated that it is planning a new stock offering as it seeks to raise money as the COVID-19 pandemic affects travel demand.
United Airline to raise $1 billion from the stock sale
The airline indicated that it will offer to sell around 39.25 million of its shares which will be worth around $1 billion as per Tuesday’s closing share price of $27.88. The company notified the SEC about its plans and so far has given its underwriters of the offering the green light to buy another 2.925 million shares in the next 30 days. Its underwriters for the stock are Morgan Stanley and Barclays.
Since the beginning of this year, United’s stock has lost almost 70% of its value. The stock offering demonstrates the desperate situation the company is in as it tries to raise cash as the COVID-19 pandemic continues to impact revenue. It is not only United Airlines that is feeling the impact as other carriers are also in the same precarious situation and have had to contend with the lack of air travel demand.
United Airlines receives $5 billion loans from the federal government
The stock offering comes at the back of the company receiving $5 billion in loans and federal cash as it tries to survive amid the coronavirus pandemic that has affected air traveling demand. The company indicated that it will borrow around $4.5 billion from other stimulus packages for airlines. The US federal government dolled $50 billion in grants and loans to support the ailing airline sector.
United Airlines CEO Oscar Munoz and President Scott Kirby indicated that currently air travel demand is zero and there are no signs that the situation will improve any time. Airline travel in the US has plummeted around 95% and there is no clear timetable on when things will normalize.
Early this week the company reported a loss of $2.1 billion for the first quarter of 2020 which is the largest quarterly loss the company has reported since 2008.
