Cash-Hungry Companies Get Creative Raising Capital

A number of companies with depressed stocks and limited access to traditional financing are doing so, often adding sweeteners like extra dividends or preferred-note status to lessen the risk and make the deals more attractive for investors., are announcing them after they are done, in an effort to limit an additional drop in share price.

Typically, public companies disclose plans to sell more shares and then spend a few days meeting with prospective investors to drum up interest, often putting pressure on existing shares as they do so.Private companies, many growing fast but with limited cash flow and their plans for initial public offerings on hold, are seeking funds that will help them reach profitability.

Some deals involving private companies aren’t publicized and likely won’t be revealed until they file regulatory paperwork to go public. “The big misconception is that the private financing world is closed,” said Keith Canton, head of private capital markets atLordstown raised $170 million, nearly half of its market capitalization, in a combination common-stock and private investment byin November. Lordstown, whose shares have fallen more than 80% since they started trading in 2020, provided Foxconn with preferred shares that pay a dividend and can be converted into common stock once certain conditions are met.

Arctic Wolf Networks Inc. had planned to go public this year, but with the new-issue market shut, the cybersecurity company launched a $401 million convertible-note offering instead. The deal, announced in October, was led by“Our backlog for these types of deals has never been larger, at least in my history of being here,” said Kurt Tenenbaum, a managing director at Blue Owl.

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