Mesa May Issue Twelve Times Its Current Outstanding Shares

When your shares are sitting at just over a quarter, it doesn’t make it easy to raise extra funds. Mesa, potentially in need of doing just that, is about to dilute existing shareholders significantly. This appears to be their best (only?) option at this point in time.

Mesa received approval from existing shareholders to issue up to 900 million shares of common stock in the company. That’s up from a authorized level of 75 million today. Why would shareholders give them that permission? Well it’s either that or I’d imagine bankruptcy might be on the table. Were I a shareholder, I’d do anything to avoid bankruptcy and the pennies on the dollar that it would bring me at best.

See, Mesa sold a bunch of convertible notes in the past few years, and there are various points where Mesa can be forced to repurchase those notes. If they don’t want to use cash, they can pay for it in stock. At the end of the second quarter (they still haven’t filed their third quarter statements), Mesa had just shy of $50 million in the bank. If you look at the increase in authorized shares (825 million) and multiply it by today’s share price of 28 cents, you can see that it will raise $231 million if all shares are issued. So clearly, there’s a need for more cash than Mesa has in the bank, and this is the best way to do it, even if it means serious dilution for existing shareholders.

We’ll see how many shares Mesa actually has to issue in the coming months.