Hewlett Packard Enterprise (HPE) saw its shares fall by as much as 6% in trading on Tuesday following its announcement of a $1.35 billion mandatory convertible preferred stock offering. The information technology company is aiming to fund its acquisition of Juniper Networks (JNPR) with this move. Earlier this year, HPE revealed plans to acquire the networking equipment manufacturer in a $14 billion all-cash deal. This acquisition is part of HPE’s strategy to bolster its AI offerings.
Details of HPE’s Convertible Offering
Turning to the specifics, HPE stated that the net proceeds from the offering will be used to cover the costs and fees associated with the pending acquisition. Specifically, a convertible preferred stock offering allows investors to purchase preferred shares, which typically offer higher dividends than common shares, with the added option to convert them into common stock.
Furthermore, under the terms of this offering, HPE will offer 27 million preferred shares, which will automatically convert into common stock by around September 1, 2027, unless they are redeemed or converted earlier. This announcement follows HPE’s decision to raise its annual profit forecast last week, driven by growing demand for AI servers as enterprises increase spending on AI infrastructure.
Is HPE Stock a Good Buy?
Analysts remain sidelined about HPE stock, with a Hold consensus rating based on two Buys and eight Holds. Over the past year, HPE has increased by more than 5.1%, and the average HPE price target of $20.44 implies an upside potential of 25.4% from current levels.
