Applied Optoelectronics Inc. (AAOI) stock plummeted by 5% on Thursday during intraday trading, as the company announced plans to exchange nearly $77 million of its existing convertible senior notes due in 2026 for a combination of new convertible notes and common shares.
The fiber optic cables maker stated that it entered into transactions with noteholders to exchange $76.7 million of its 5.25% convertible senior notes due in 2026. The exchange offer includes issuing new convertible senior notes due in 2030 and common shares, with an initial conversion rate of approximately 23.1 shares per $1,000 principal amount of the 2030 notes.
The proposed exchange transaction has raised concerns among investors about potential dilution of existing shareholders' ownership and an increase in the company's debt load. The initial conversion price of $43.31 per share for the new 2030 notes represents a 27.5% premium over the stock's last closing price, which could lead to further dilution if the notes are converted into shares in the future.
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