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Investing.com -- Shares of Aurora (NASDAQ: AUR) plummeted 22% following the announcement by its largest shareholder, Uber Technologies (NYSE: NYSE:UBER), of its intention to offer $1 billion in Exchangeable Senior Notes due in 2028 in a private placement. The move has raised concerns among investors about potential dilution and the impact on Aurora’s stock value.
Uber’s decision to issue these notes, which are exchangeable into cash or Aurora common stock at Uber’s discretion, has introduced uncertainty into the market regarding Aurora’s stock. The offering, aimed at qualified institutional buyers, also includes an option for the initial purchaser to acquire an additional $150 million principal amount of notes. The terms, including interest rate and initial exchange rate, will be set during the pricing of the offering.
The notes will be senior obligations of Uber and will be backed by first-priority liens on certain pledged reference property held by Uber’s subsidiary, Neben Holdings, LLC. This property will initially consist of the maximum number of shares of Aurora common stock that can be delivered upon exchange of the notes. Neben will guarantee the notes on a limited recourse basis aligned with the pledged reference property.
Uber has stated that the net proceeds from the offering will be used for general corporate purposes, which may include strategic investments, although no specific plans have been disclosed at this time. The notes and the guarantee have not been registered under the Securities Act or any state securities laws, and may not be offered or sold in the United States without registration or an exemption from registration requirements.
Investors are reacting to the potential implications of this financial maneuver, with concerns about dilution of their holdings in Aurora leading to a significant drop in the company’s stock price. The full impact of this offering on Aurora’s market position will become clearer once the terms of the notes are finalized and the offering is priced.