iQiyi Raises Two Red Flags With New Debt and Stock Offerings

iQiyi's (NASDAQ: IQ) stock recently plunged to a six-month low after it priced an $800 million convertible debt offering and a new ADS (American Depositary Share) offering of 40 million shares. Both transactions are expected to close by Dec. 21.

Its $800 million offering in convertible notes, which will mature on June 15, 2026, bears an annual interest rate of 4%. On or after that maturity date, those notes can be converted at any time to 44.8179 shares per $1,000 in principal -- which equals a conversion price of about $22.31 per ADS.

On Aug. 1, 2024, those investors can ask iQiyi to repurchase "all or part" of their notes for 100% of the principal value -- which sounds like a safety net for investors who are concerned iQiyi's ADS could be worth less than $22.31 per share by the maturity date.

Source Fool.com