The stock of the Fiat Chrysler Automobiles company had a rapid descent yesterday, mainly due to investors divesting the shares after they purchased a $2.5 billion bond that converted into additional shares.
The analysts point out the move to issue the $2.5 billion convertible bond is just the start of the strategy the company wants to use to lower its considerable debt and gather the necessary funds to implement a five-year investment plan. According to the observers, the drop was also a consequence of investors making more room to buy FCA shares at a discounted price to the current market level. Yesterday the automaker priced the two-year bond and offers a large, 7.875 % return. Investors also snatched the bond because it offered them stock in FCA’s prized possession Ferrari – ahead of the planned spin off and initial public offering.
Besides the convertible, the seventh-largest global automaker also offered 87 million common shares at $11 or 8.8 euros – 4% discounted to the Wednesday closing price on the New York Stock Exchange and a larger 10% discount to Milan’s closing. The carmaker estimates the recent financial moves would secure net proceeds of around $3.38 billion, with the possibility to gain as much as $3.88 billion if overallotment options are exercised – the company said in a regulatory filling.