Why Canadian Solar Stock Declined Today?
Sep 11, 2020 by InvestorDestination Team
Shares of Canadian Solar (NASDAQ: CSIQ) dropped more than 12% today. Recently, after hitting a sixty months all-time high, the stock has begun to decline, which can be attributed to the general market volatility. However, today's drop is triggered by the company's announcement.
Yesterday, after the close of trading, the company announced it would float $200 million worth of convertible senior notes due in 2025. When a company issues convertible debt, there is a possibility that debt holders might opt for the company's equity, which will dilute its shares. Investors are concerned about dilution.
The company has more than 2B in debt, and its debt to asset ratio is around 38%. The new debt will increase its already existing high debt. For the past few years, the company was burning cash. However, in 2019 it generated positive free cash flow. Now the company is issuing convertible debt to raise cash, which might indicate challenges ahead. The company has mentioned that it plans to use the cash raised from this debt to fund general corporate purposes, such as the expansion of manufacturing capacity, development of solar power projects, and working capital. In 2020, solar demand has declined for the first time in twenty years. The COVD-19 has caused short-term challenges for the industry. However, the long-term demand for solar is indisputable.
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