SMTC - Why Semtech Stock Collapsed by 22% on Thursday
2023-10-19 10:55:37 ET
Shares of Semtech (NASDAQ: SMTC) crashed in early trading Thursday after the semiconductor chip maker announced plans to sell $250 million worth of senior convertible notes -- in other words, debt. As of 10:32 a.m. ET, its shares were down by 22.5%.
Semtech explained that it needs the money "in order to prepay term loans outstanding under the Company's senior credit facilities" -- in other words, to roll over old debt before it comes due. The new notes will come due in 2028.
Management didn't say what interest rate it will be paying on this new debt, however. That probably won't be known until the debt issuance is priced. But considering how much interest rates have risen over the past couple of years, it's likely this debt issuance is going to raise Semtech's interest costs . And eventually, if the notes are converted into stock, this move will dilute the company's existing shareholders.
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Why Semtech Stock Collapsed by 22% on Thursday