Meritor Inc. (MTOR:US), a maker of axles and brakes for trucks and buses, fell the most in seven weeks after the company proposed a $150 million convertible debt offering, raising investor concerns that the shares would be diluted.
Meritor dropped 7.6 percent to $3.89 at 11:51 a.m. in New York after reaching $3.83, for the biggest intraday decline since (ZIP:US) Oct. 10. The shares had dropped 21 percent this year through yesterday.
Meritor said in a statement today it plans to offer notes due 2026 convertible into stock and may grant purchasers $22.5 million more of debt. The Troy, Michigan-based company had 96.5 million shares outstanding as of Nov. 7.
“I would guess it is dilution from the convertible offering,” David Leiker, an analyst at Robert W. Baird & Co. in Milwaukee, said in an e-mail of today’s decline in Meritor shares.
Convertible debt under certain conditions can be converted by the holder into the company’s stock, increasing the number of shares outstanding.
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