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United to Raise Up to $1 Billion in Secondary Stock Offering

United Airlines Holdings (NASDAQ: UAL) plans to raise about $1 billion in fresh equity to boost its cash reserves and help it ride out the COVID-19 crisis.

In a regulatory filing on Monday, the airline said it plans to offer 25.3 million shares. At current prices, that would raise $1.038 billion, though secondary offerings are often done at a slight discount.

A United Airlines plane takes off.

Image source: United Airlines.

Airlines have been devastated by the pandemic, with revenue falling nearly 70% year over year. United shares are down more than 50% year to date, but the stock is up 20% in November following a series of announcements concerning progress on vaccine development.

The vaccine should eventually help spur a return to flying that will in turn allow airlines to stem losses, but that process will take time. In the meantime, airlines can use all the cash they can get. In the third quarter, United burned about $25 million per day, ending the quarter with $19.4 billion in total liquidity.

It's the second airline to take advantage of the recent rally to raise fresh capital. American Airlines Group (NASDAQ: AAL) earlier this month announced its intention to sell 38.5 million shares of its common stock, seeking to raise about $500 million.

The secondary offerings dilute existing holders by giving them a smaller piece of the overall pie, but if the added cash helps ensure the airlines can avoid bankruptcy, existing holders will still come out ahead in the long run.

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