Meritor Inc., 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 5 percent to $4 at the close in New York, for the biggest daily decline since Oct. 10. The shares have dropped 25 percent this year.
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.