Shares of SolarEdge Technologies (NASDAQ:SEDG) plunged more than 18% premarket Tuesday after the company announced its intention to offer $300 million aggregate principal amount of Convertible Senior Notes due 2029 in a private offering.
In connection with the Offering, SolarEdge said it expects to grant the initial purchasers of the Notes a 13-day option to purchase up to an additional $45 million aggregate principal amount of the Notes on the same terms and conditions.
The company intends to use the net proceeds to pay the cost of the capped call transactions, redeem a portion of its outstanding 0.000% Convertible Notes due 2025 and for general corporate purposes.
Reacting to the announcement, analysts at Truist noted that the company also said that while most guidance items for 2Q were largely unchanged, SEDG now expects 2Q free cash flow of -$150 million, considerably below its estimates of positive $112 million and Street estimates of $216 million, respectively.
SEDG cited certain discretionary minority investments, extensions of credit provided to certain customers, higher than expected working capital related to the ramp of U.S. manufacturing and a slower pace of payments on accounts receivable as the key reasons for the negative FCF outlook.
"While we don't expect liquidity to be a concern for SEDG as the company ended 1Q w/just under $1Bn in cash/equivalents, the negative FCF guide likely represents another proof point of continued market challenges/inventory overhangs that could slow the reduction in SEDG's >$1.5Bn in inventories on B/S as of 1Q24," said analysts at Truist.
Meanwhile, analysts at Scotiabank said SolarEdge reconfirmed 2Q guidance for topline ($265M midpoint), Non-GAAP GM% (-2%), and solar segment metrics.
"Separately, the company announced a $300M convertible note offering (due 2029, greenshoe of $45M) to fund its FY25 maturity," highlighted the analysts. "Although a reiterated 2Q, the cash/customer commentary we view as a net negative for the stock in the near term."