Pinnacle West Announces Pricing of a Public Offering of 9,774,436 Shares of Common Stock
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An offering of this scale by Pinnacle West Capital Corp. indicates a strategic move to raise significant capital. The use of forward sale agreements is a notable aspect, as it allows the company to lock in a selling price for its shares, potentially hedging against future price volatility. The initial non-receipt of proceeds until the possible physical settlement suggests a focus on long-term capital needs rather than immediate liquidity. Investors should assess the implications of this dilutive event on earnings per share and consider the potential for share price movement in response to the increased number of shares available in the market.
Furthermore, the involvement of major financial institutions as underwriters and forward purchasers, such as Barclays and Wells Fargo, adds credibility to the offering and may influence market perception positively. However, the option for additional share purchase by underwriters could lead to further dilution if exercised. Analyzing the historical performance of Pinnacle West's stock around past offerings and the company's capital expenditure plans could provide insights into the potential impact of this event on the company's financial health and stock performance.
The energy sector is capital-intensive and Pinnacle West's decision to invest in Arizona Public Service Company suggests an expansion or modernization initiative. The scale of the offering reflects the potential size of these projects. Investors should consider the regional growth prospects, regulatory environment and competitive landscape in Arizona's energy market. The timing of the offering and the settlement of the forward sale agreements by September 2025 may align with projected timelines for these capital projects.
It is also important to note the current market conditions for utility stocks, which are often seen as stable investments, especially in volatile markets. The fixed forward sale price can be a double-edged sword; if the market prices for Pinnacle West's shares rise significantly, the company might forego potential additional capital, but if the market prices decline, the company benefits from the locked-in higher price. The decision to potentially use net proceeds for capital expenditures and general corporate purposes could signal to investors a commitment to growth and operational efficiency.
The offering's compliance with SEC regulations and the use of a shelf registration statement are crucial for legal soundness and investor confidence. The forward sale agreements also have legal intricacies, such as the adjustments to the initial forward sale price and conditions under which Pinnacle West may elect different settlement options. Investors should understand the terms of these agreements, as they could affect the timing and amount of capital that Pinnacle West ultimately receives.
Additionally, the legal stipulations that no sale of securities will occur in jurisdictions where it would be unlawful and the necessity of a prospectus supplement and accompanying base prospectus, underscore the regulatory framework governing such transactions. The potential long-term settlement date provides Pinnacle West with flexibility but also introduces a degree of uncertainty that must be navigated with careful legal consideration, particularly regarding the disclosure of risks associated with the offering to potential investors.
Pinnacle West has granted to the underwriters the option to purchase up to an additional 1,466,165 shares of its common stock. If such option is exercised, Pinnacle West may, in its sole discretion, enter into additional forward sale agreements with the forward purchasers in respect of, in the aggregate, the number of additional shares of Pinnacle West’s common stock that are subject to the exercise of such option, and Pinnacle West currently anticipates that, if such option is exercised, it will do so. The offering is expected to close on March 4, 2024, subject to the satisfaction of customary conditions.
Barclays, Citigroup, Mizuho and Wells Fargo Securities are acting as joint book-running managers for this offering. The underwriters may offer shares of Pinnacle West’s common stock in transactions on the New York Stock Exchange, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices.
In connection with the offering, Pinnacle West entered into separate forward sale agreements with Mizuho Markets Americas LLC and Wells Fargo Bank, National Association, referred to in such capacity as the forward purchasers, pursuant to which Pinnacle West has agreed to sell shares of its common stock to the forward purchasers at an initial forward sale price per share equal to the price per share at which the underwriters purchase the shares in the offering, subject to certain adjustments. In connection with the forward sale agreements, the forward purchasers or their respective affiliates, acting as forward sellers are borrowing from third parties an aggregate of 9,774,436 shares of Pinnacle West’s common stock. Such borrowed shares of Pinnacle West’s common stock will be delivered by the forward sellers for sale to the underwriters in the offering. Settlement of each forward sale agreement is expected to occur no later than September 4, 2025. Although Pinnacle West expects to settle each forward sale agreement entirely by the full physical delivery of shares of its common stock in exchange for cash proceeds, Pinnacle West may, subject to certain conditions, elect cash settlement or net share settlement for all or a portion of its rights or obligations under the forward sale agreements.
Pinnacle West will not initially receive any proceeds from the sale of shares of its common stock by the forward sellers or their affiliates to the underwriters. If Pinnacle West elects physical settlement of the forward sale agreements, it expects to use any net proceeds received for investment in its principal subsidiary Arizona Public Service Company to fund capital expenditures and general corporate purposes.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The offering of these securities may be made only by means of a prospectus supplement and accompanying base prospectus relating to this offering.
The public offering is being made pursuant to an effective shelf registration statement that has been filed with the Securities and Exchange Commission (the “SEC”). A preliminary prospectus supplement related to the offering has been filed with the SEC and is available on the SEC’s website. In addition, copies of the preliminary prospectus supplement and accompanying base prospectus relating to the shares of common stock being offered may be obtained by contacting: Barclays Capital Inc., c/o Broadridge Financial Solutions, 1155 Long Island Avenue,
General Information
Pinnacle West Capital Corp., an energy holding company based in
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements based on current expectations. These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “believe,” “plan,” “expect,” “require,” “intend,” “assume,” “project,” “anticipate,” “goal,” “seek,” “strategy,” “likely,” “should,” “will,” “could,” and similar words. Because actual results may differ materially from expectations, we caution readers not to place undue reliance on these statements. A number of factors could cause future results to differ materially from historical results, or from outcomes currently expected or sought by Pinnacle West or Arizona Public Service (“APS”). These factors include, but are not limited to, the factors discussed in the most recent Pinnacle West/APS Form 10-K and 10-Q along with other public filings with the Securities and Exchange Commission, which readers should review carefully before placing any reliance on our financial statements or disclosures. Neither Pinnacle West nor APS assumes any obligation to update these statements, even if our internal estimates change, except as required by law.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240229910819/en/
Media Contact: Alan Bunnell (602) 250-3376
Analyst Contact: Amanda Ho (602) 250-3334
Website: pinnaclewest.com
Source: Pinnacle West Capital Corp.
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