InterDigital Inc (IDCC)

[FISH21049]

This Stock Just Broke a Cardinal Rule
By Dan Caplinger - May 24, 2022 at 7:36PM
The Motley Fool

InterDigital looks to modify its capital structure
Elsewhere, shares of InterDigital fell 8% after hours. The mobile and video technology specialist has seen its stock lose 25% of its value since this time last year, but it apparently decided it had no choice but to go to the capital markets now to raise cash in order to make changes to its capital structure.

InterDigital announced a $350 million private offering of convertible notes. The notes will mature in five years, and the interest rate on the debt and the conversion price into which bondholders can exchange their bonds for shares of InterDigital stock will be determined as part of the overall pricing process.
Part of the reason InterDigital is doing this now is to repurchase similar convertible notes that are coming due in 2024. In addition, the company wants to buy back stock as part of its authorized share repurchase program.

Yet investors aren't thrilled about InterDigital issuing a debt-equity hybrid with interest rates on the rise and the stock price on the decline. That's essentially the worst pricing environment InterDigital could have picked, raising the question of why the company waited until now to move forward with such a decision.