SoFi, Albemarle, MicroStrategy all fall on convertible bond plans
Several companies, including SoFi (SOFI), Albemarle (ALB), and MicroStrategy (MSTR), have announced plans to issue convertible bonds, a move that has put downward pressure on their respective stock prices during Tuesday's trading session.
Albemarle, a leading producer of lithium, unveiled the largest deal among the three, aiming to raise $1.75 billion through a convertible bond offering.
Yahoo Finance's Josh Lipton and Julie Hyman break down the details.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Angel Smith
Video Transcript
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JOSH LIPTON: Less than 15 minutes away from the closing bell on Wall Street. Let's check in on a few trending tickers. We'll begin today, Julie, with SoFi, MicroStrategy, and Albemarle. And what do those have in common? That's what you're asking. Convertible--
JULIE HYMAN: Well, I'm not asking, I know the answer.
JOSH LIPTON: I'm telling, how about I'm just telling. Convertible bond sales, which are, by the way, just generally ramping here, which is interesting. Barron's noting in the past 24 hours eight new convertible bond deals totaling more than five billion. So let's go through the notable transactions. The largest is Albemarle, 1.75 billion. SoFi comes in next, 750 million, and MicroStrategy's deal is for 600 million.
JULIE HYMAN: So you might be asking, or you might not be asking but viewers might be asking, well, why do these stocks go down when there's a convertible offering? Well, it's because these bonds are convertible into shares at some further point. And when you have more shares, it tends to dilute the value for existing shareholders, there's more supply of shares. So more supply of something, the price tends to go down. So they're falling in anticipation of that.
It's also worth mentioning, by the way, what they're using the money for, because it's interesting here. As we know, MicroStrategy is the biggest corporate holder of Bitcoin. So apparently, they plan to pay for some Bitcoin with doing this. They own just under what 200,000, just about 193,000 Bitcoin is what they owned as of February 25. Albemarle is a lithium company, so they plan on financing some more of their lithium mining operations. And I have to admit, I'm not sure what SoFi is using its money for.
JOSH LIPTON: You should ask.
JULIE HYMAN: Operations, I assume. I assume it's in the file.
JOSH LIPTON: By the way, put that number in context. If all the deals, apparently, in the past 24 hours are priced, US new issuance for 2024 would hit $15 billion compared with about 10 billion for the first week of March 2023. Just some context there.
JULIE HYMAN: We've seen record issuance. So it makes sense.
