Boeing Strike Increases Likelihood of Equity Raise, According to Wells Fargo

According to a report from Wells Fargo, Boeing is facing significant pressure to raise funds through equity offerings due to ongoing labor disputes with its IAM 751 union.

With negotiations having collapsed again, Wells Fargo sees this as a critical moment for Boeing to secure additional cash. The latest discussions, aimed at addressing wage and benefits issues, ended without any resolution after Boeing retracted its previous proposal of a 30% pay increase over four years.

The union is steadfast in its demands for greater wage increases, restoration of pension benefits, and other enhancements. Wells Fargo highlighted that Boeing may have one last chance to finalize an agreement before its earnings report scheduled for October 23. They believe it is in Boeing’s interest to reach an agreement before seeking more funding through equity offerings. However, the failed negotiations are intensifying the urgency for the company to obtain additional financial resources.

The ongoing strike, anticipated to extend throughout much of October, is expected to cost Boeing around $2 billion, further exacerbating its financial challenges.

Wells Fargo also noted that the significant reversal in working capital originally projected for the fourth quarter now seems unlikely, a situation worsened by actions from credit rating agencies, including S&P, which has placed Boeing’s debt under review for a potential downgrade.

The analysts estimate that Boeing will need to raise between $10 billion and $15 billion soon to ensure its cash reserves remain above $10 billion through 2025. According to their assessment, Boeing’s cash balance is likely to have fallen to around $8 billion by the end of the third quarter, leaving limited options moving forward. This situation could result in net debt of approximately $30 billion to $40 billion, equating to 2.5 to 3 times the estimated EBITDA for 2026.