On December 3, 2024, Consolidated Edison, Inc. (ED, Financial), commonly known as Con Edison, announced a significant financial maneuver by entering into a forward sale agreement with JPMorgan Chase Bank, National Association. This agreement involves the sale of 7,000,000 of Con Edison’s common shares, each with a par value of $0.10. The forward sale agreement is expected to settle by December 31, 2025, although it may be settled earlier at Con Edison’s discretion, subject to certain conditions.
The forward sale agreement, initially priced at $96.66 per share, allows for daily adjustments based on a floating interest rate factor. This factor is determined by the overnight bank funding rate minus a spread, with potential decreases on specific dates due to expected dividends on the common shares. If the overnight bank funding rate falls below the spread, the forward price will decrease daily.
Con Edison retains the option to settle the agreement physically, in cash, or through net share settlement. In the event of cash or net share settlement, the settlement amount will be calculated based on the market value of the common shares during the unwind period minus the adjusted forward price, multiplied by the number of shares involved. Depending on whether this amount is positive or negative, either Con Edison or the forward purchaser will compensate the other party accordingly.
The forward purchaser, JPMorgan Chase, holds the right to accelerate the agreement under specific circumstances, such as difficulties in borrowing shares, regulatory ownership issues, or significant corporate events like mergers or delistings. Such acceleration could require Con Edison to issue additional shares, potentially diluting earnings per share and return on equity.
Additionally, Con Edison has entered into an underwriting agreement with J.P. Morgan Securities LLC for the sale of these common shares, which are registered under the Securities Act of 1933. This strategic move is part of Con Edison’s broader efforts to optimize its capital structure and financial flexibility.
Should you invest in Consolidated Edison Inc (ED, Financial) right now? Before you do it, it’s important to understand the business profitability and stock valuations, and find out what the warning signs are about. See the in-depth Consolidated Edison Inc (ED) stock research here.
