The Boeing Company (BA), the aerospace firm, has experienced serious woes in recent years, including crashes of its 737-MAX airliner, production delays of its Dreamliner aircraft, problems with its space vehicles that stranded astronauts on the international space station, and a machinists’ strike in its production facilities. In the five years up to November 2024, its stock price declined by 58%. With $57.7 billion in financing debt and negative book equity of $23.6 billion, investors were concerned that the firm might be headed for bankruptcy.
In response, the firm issued $24.3 billion of equity, the largest equity offering in U.S. history. 170 million shares were issued to add to the existing 618 million shares outstanding. That strengthened the firm’ s balance sheet, a necessity, but what a shame! Issuing equity at such low prices dilutes the existing shareholders’ equity. The shareholders might avoid bankruptcy but now have to share the possible recovery with other shareholders.  They suffer a double whammy, the large drop in the share price with the operational issues and the effect of issuing stock at a much-reduced share price. Echo of the Deutsche Bank episode mentioned in chapter 5.