Dish Plans To Sell $2B In Convertible Notes; Shares Drop 4.7% Pre-Market

Shares of Dish Network dropped 4.7% in Wednesday’s pre-market trading session as the US satellite TV provider announced a plan to sell $2 billion in aggregate principal amount of convertible notes.

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According to the offering, Dish Network (DISH) expects to grant to the initial purchaser an option to buy up to an additional $300 million in aggregate principal amount of the notes to cover over-allotments. The net proceeds of the offering are intended to be used for general corporate purposes, including 5G network buildout costs, the company said.

The offered notes will be unsecured obligations and Dish will settle any conversion in cash, shares of its Class A common stock, or a combination of cash and shares. The interest rate, the initial conversion rate, and other terms and conditions of the notes will be negotiated between Dish and the initial purchaser of the notes.

Earlier this year, Dish completed its $1.4 billion acquisition of wireless carrier Boost Mobile. The deal resulted from the T-Mobile-Sprint (TMUS) merger that required an agreement from Sprint to divest its subsidiary Boost Mobile.

Guggenheim analyst Mike McCormack this month cut the stock’s rating to Hold from Buy, casting some doubt on Dish’s recent business strategy.

“While we had hoped asset value would have been realized through either a sale of spectrum, or a partnership with a deep-pocketed tech firm, those scenarios are seemingly becoming much less likely,” McCormack wrote in a note to investors. “In our view, attacking a wireless industry with deeply entrenched competitors with a starting point of less than 10 million prepaid subscribers and a lengthy and costly build ahead isn’t a strategy we can endorse.”

“While something may still materialize, we see the buildout process unfolding and do not see upside to shares as an operating company,” the analyst summed up. (See DISH stock analysis on TipRanks)

Overall, the rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 3 Buys and 2 Holds. With shares up less than 1% this year, the average price target stands at $47.67 and implies upside potential of about 34% to current levels.