Azul's shares plummeted 36.27% following the company's approval of a billion-dollar stock issuance to fund its Chapter 11 bankruptcy recovery in the U.S.
Shares of the Brazilian airline Azul fell by 36.27% on Thursday, October 19, after the company approved the issuance of new stocks worth billions to finance its judicial recovery under U.S. Chapter 11 bankruptcy laws. At the worst point in trading, shares dropped nearly 50%, highlighting investor unease about the company's financial stability. By the end of the trading day, shares were priced at R$ 162.50, a significant decrease compared to prior values.
The stock issuance will involve 45.48 trillion new ordinary shares, priced at approximately R$ 0.0001096566 each, totaling around R$ 4.99 billion. This move is part of Azul's strategy to address its financial challenges as it restructures under Chapter 11 bankruptcy protection. The funds raised through this stock sale will particularly be directed towards settling the principal of the debtor-in-possession (DIP) financing, critical for companies undergoing bankruptcy proceedings to maintain operations.
After the capital increase from this stock issuance, Azul's social capital has risen to R$ 21.76 billion, now consisting of 54.73 trillion shares. Analysts believe that the drastic drop in share prices reflects market concerns about the future viability of the airline amidst an ongoing restructuring process. Investors are wary of the significant dilution of shares and the potential implications for the company's long-term strategy and market position.
