Key Points

• Boeing’s recent rush to raise capital is a desperate survival trade.
• The company has struggled mightily and is doing mass layoffs.
• It looks like a breakup with spinoffs is the best path forward, and increasingly likely.
• Also: while Boeing crashes, “the Next Nvidia” stocks are soaring. Read more here.

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[00:00:00] Doug McIntyre: Uh, so you’ve got to be living under a rock. If you don’t know that Boeing’s (NYSE: BA) in trouble, they’re short on cash. Uh, they did what I was considered a modest raise about a week ago, but they are in the market right now. Uh, I think their target is to get 19 billion. And the last time I looked, the stock was trading up on that, which.

[00:00:26] Doug McIntyre: Sometimes when you’re offering common, it doesn’t do that way, but maybe it’s a survival trade.

[00:00:33] Lee Jackson: Well, yeah, it is. And actually it’s, it’s a common and convert. There’s a, a, uh, a big convert piece, which is only a three year. And, and for our viewers, you know, it it’ll pay a six to six and a half percent dividend.

[00:00:51] Lee Jackson: Until 2027, then it will convert to common stock at that juncture. Now, um, who knows who wants to be converted three years now, but it is gigantic, so huge common, uh, that’s all this week, you know, uh, huge, uh, convertible preferred, and they’re out of, they’re out

[00:01:11] Doug McIntyre: of time and money. I, one of the things that people don’t spend enough time on with Boeing is, is that Boeing has three divisions, right?

[00:01:21] Doug McIntyre: It’s got commercial, which everybody is focused on right now, which is completely broken. It’s got defense. Which is look, it’s a cost plus business, but it’s still, it’s still a good, good business. Yeah. Oh, very good. Uh, you know, if the world continues to be at war, they get to be a better, better business, but then they have basically what is a services business, which is very profitable.

[00:01:45] Doug McIntyre: Yes. And it sort of services all the things that they make. Plus some of the things their competitors make. So I wouldn’t give up on Boeing, particularly since as far as I’m concerned, it is a three legged stool.

[00:02:00] Lee Jackson: Yeah. And you know, it never ceases to amaze me and both, both of us grew up in Detroit. So we saw how unions could manhandle major corporations.

[00:02:12] Lee Jackson: But I mean, this is, Not going to be easy because they’re going to lay off 17, 000 employees. That is a massive layoff. And, you know, and now they’re, they’re trying to get there. They’re trying to get a contract done and, you know, these guys are backing away from it and it’s like. Okay, you can back away from so long, but they’re going to have to find a way to have a meeting of the minds here so they can save this, this, this great company.

[00:02:38] Lee Jackson: Because it seems like ever since they moved the corporate headquarters, it has been a nightmare.

[00:02:47] Doug McIntyre: Well, I believe, I believe that there’s going to be a restructuring of Boeing. I do too. By that, I think that there is a chance that they will separate the commercial aircraft business from the other two businesses, which are

[00:03:02] Lee Jackson: or send them off as separate entities.

[00:03:04] Doug McIntyre: But I, I think that you could see. A company that’s broken into two or three parts and that you have this high risk. Um, and most of the cash that they’re raising now ends up going with commercial aircraft because the other two businesses don’t need huge amounts of cash. They’re in essence, bringing it in.

[00:03:24] Doug McIntyre: If I’m a buyer of Boeing stock right now, what I would do is I would look at it as a breakup play. I would ask myself the question and you know, it’s impossible if you’re not a major league wall street analyst. Actually do this math, but you can go in to the Boeing quarterly reports or annual report. You can look at the revenue.

[00:03:47] Doug McIntyre: You can look, they show operating income by division. Yep. You can ask yourself based on the trajectory of those businesses and the trajectory of the commercial aircraft business. What is that company worth? In three parts. Now we, we found up there’s a long time ago with AT& T, the parts were more worth more than the original AT& T (NYSE: T).

[00:04:12] Doug McIntyre: So there’s a gamble there. Um, if you’re thinking about buying Boeing shares, I would not just look at this raise. I would ask myself whether or not Boeing ends up as more than one company.

[00:04:25] Lee Jackson: Yeah. And you remember when AT& T, when they did disembowel AT& T, AT& T shareholders got every one of the baby Bells, every one of them.

[00:04:34] Lee Jackson: And so, you know, you got Southwestern Bell, you got Bell Atlantic, you got all of them. So that could very well be the plan at Boeing is to spin that off to current shareholders. And that would be, that would be kind of a nice thing to do given that’s been a very, very difficult three years. Most of it’s self inflicted.

[00:04:55] Doug McIntyre: Yeah.

 

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