UGI Announces Results of Final Remarketing of 0.125% Series A Cumulative Perpetual Convertible Preferred Stock and Settlement Rate for Purchase Contracts Forming Part of its Corporate Units
UGI (NYSE: UGI) announced the final unsuccessful remarketing of its 0.125% Series A Cumulative Perpetual Convertible Preferred Stock. The preferred stock has a liquidation preference of $1,000 per share and was originally issued as part of the company's corporate units on May 25, 2021. The company revealed that 2,200,000 corporate units are outstanding, each consisting of one purchase contract and a 10% undivided beneficial interest in one share of convertible preferred stock. Each holder of a corporate unit will receive 2.2973 shares of UGI common stock, with cash paid for any fractional shares. The settlement rate was based on the volume-weighted average price of UGI's common stock over the 20 trading days ending May 30, 2024. The settlement of the purchase contracts is expected around June 3, 2024.
- Each holder of a corporate unit will receive 2.2973 shares of UGI common stock.
- Cash will be paid in lieu of fractional shares, facilitating smoother transactions for investors.
- The process will be automatic, without requiring any action from unit holders, ensuring convenience.
- The final remarketing of the 0.125% Series A Cumulative Perpetual Convertible Preferred Stock was unsuccessful.
- Unsuccessful remarketing may indicate financial challenges or lack of investor interest.
- Unsuccessful remarketing could potentially lead to decreased investor confidence.
- The settlement rate for the purchase contracts is based on the stock price over the last 20 trading days, which could be unfavorable if the stock price has declined.
Insights
UGI Corporation's announcement of the unsuccessful final remarketing of its 0.125% Series A Cumulative Perpetual Convertible Preferred Stock is significant news for investors. This failure to remarket indicates that the company was unable to find buyers at a suitable price, which could reflect underlying market concerns about UGI's valuation or market conditions.
From a retail investor’s perspective, the forced settlement of the purchase contracts through the conversion of the Corporate Units into common stock is particularly notable. Each Corporate Unit holder will receive 2.2973 shares of UGI common stock. Considering UGI’s share price volatility, the market value of the settlement could significantly impact investors' portfolios. Investors should evaluate their positions and consider how this conversion could affect the dilution of existing shares. Dilution occurs when new shares are issued, reducing the ownership percentage of existing shareholders, which can affect share prices negatively in the short term.
Moreover, the timing of the settlement rate determination, based on the daily volume-weighted average price over a 20-day trading period, introduces an element of market timing risk. While this mechanism aims to average out short-term price fluctuations, it still exposes investors to specific market conditions that may not be favorable.
Finally, the lack of par value and liquidation preference of $1,000 per share for the Convertible Preferred Stock might have been less attractive to potential investors, influencing the remarketing outcome. UGI's investors should keep an eye on how the market reacts to this news in the coming days, as it may influence the stock's performance due to perceptions of financial health and investor confidence.
The decision by UGI Corporation to convert the Corporate Units into common stock at a settled rate has broader market implications. This news highlights a strategic shift in the company’s capital structure, potentially signaling challenges in raising funds through preferred stock. The conversion into common stock might alleviate some pressure on UGI's liquidity in the short term, but it also suggests that the company may face difficulties in maintaining its preferred stock offerings in the current market environment.
For retail investors, understanding the dynamics of preferred stocks versus common stocks is crucial. Preferred stocks typically offer fixed dividends and have a higher claim on assets than common stocks in the event of liquidation, making them appealing to risk-averse investors. The fact that UGI couldn’t remarket its preferred shares might imply concerns about the company’s future profitability or broader market uncertainties.
This conversion will result in an increased number of common shares in the market, potentially leading to a temporary depression in UGI’s stock price due to higher supply. However, over the long term, if UGI can effectively use the funds from this conversion to improve operational efficiencies or invest in growth opportunities, the stock price might recover and benefit shareholders. Investors should monitor UGI’s strategic initiatives post-conversion to gauge any long-term positive impacts.
Additionally, the cash paid in lieu of fractional shares, while a logistical necessity, ensures that investors receive precise compensation but could also be seen as an administrative overhead for the company.
Each holder of a Corporate Unit will receive 2.2973 shares (the “Settlement Rate”) of UGI common stock, without par value, with cash to be paid in lieu of any fractional share. The Settlement Rate was determined based upon the daily volume-weighted average price per share of UGI’s common stock over the 20 consecutive trading days ending on, and including, May 30, 2024.
As of June 3, 2024, the Convertible Preferred Stock in which the Corporate Units represent a beneficial ownership interest will be delivered, automatically and without requiring any action by the holders of such Corporate Units, to UGI to satisfy in full the obligations to pay the purchase price for the UGI common stock to be delivered upon settlement of the Purchase Contracts forming part of such Corporate Units. Settlement of the Purchase Contracts is expected to occur on or about June 3, 2024.
About UGI Corporation
UGI Corporation (NYSE: UGI) is a distributor and marketer of energy products and services in the US and
Forward-Looking Statements
This press release includes forward-looking statements within the meaning of the Securities Act of 1933 and of the Securities Exchange Act of 1934. Forward-looking statements represent UGI’s current expectations regarding future events and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Among those risks and uncertainties are market conditions and risks relating to UGI’s business, including those described in periodic reports that UGI files from time to time with the SEC. The forward-looking statements included in this press release speak only as of the date of this press release, and UGI does not undertake to update the statements included in this press release for subsequent developments, except as may be required by law.
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Investor Relations
610-337-1000
Tameka Morris, ext. 6297
Arnab Mukherjee, ext. 7498
Source: UGI Corporation
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