Summary
Consolidated Edison, Inc. (Con Edison) has entered into forward sale agreements with major financial institutions to sell approximately 13.6 million shares of its common stock. The initial forward sale price is set at $75.537 per share, with settlement expected by December 27, 2019. These agreements allow Con Edison to effectively lock in a sale price for a significant portion of its equity while deferring the actual issuance of shares. This strategy can be used to raise capital without immediate dilution, though the final settlement terms and potential adjustments to the sale price based on interest rates and dividends are important considerations for investors.
Key Highlights
- 1Con Edison entered into forward sale agreements to sell 13,636,363 common shares.
- 2The initial forward sale price is set at $75.537 per share.
- 3Settlement of the forward sale agreements is expected by December 27, 2019.
- 4Agreements are generally physically settled by issuing shares, but cash or net share settlement is an option under certain conditions.
- 5Forward purchasers have rights to accelerate settlement under specific events, which could lead to dilution for existing shareholders.
- 6The forward sale price is subject to daily adjustments based on floating interest rates and potential decreases related to expected dividends.
Frequently Asked Questions
The primary purpose is to raise capital by effectively selling a significant number of common shares while deferring the actual issuance and delivery of those shares to a future date. This can help manage potential dilution and lock in a sale price.
The initial forward sale price is $75.537 per share. This price is subject to daily adjustments based on market conditions, interest rates, and expected dividends.
Yes, there is a potential for dilution. If the forward purchasers accelerate settlement under certain conditions, Con Edison may be required to physically issue shares, which would increase the total number of outstanding shares and dilute earnings per share and return on equity for existing shareholders.
The forward sale agreements allow for physical settlement (issuing shares at the agreed forward price) or cash/net share settlement. In the case of cash or net share settlement, the amount received or paid by Con Edison will be based on the difference between the market value of the shares during an unwind period and the applicable forward sale price, adjusted for the number of shares involved.